Receives the stock dividend

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Reference no: EM13916603

Moss corporation has a single class of common stock outstanding. Tillie owns 1,000 shares, which she purchased in 2011 for $100,000. Moss declares a stock dividend payable in 8% preferred stock having a $100 par value. Each shareholder receives one share of preferred stock ten shares of common stock. On the distribution date - December 10th, 2015 - the common stock was worth $180 per share, and preffered stock was worth $100 per share. On April 1,2015, Tillie sells half of her preferred stock for $5,000.

A. How much income must Tillie recognize when she receives the stock dividend?

B. How much gain or loss must Tillie recognize when she sells the preferred stock? ( Ignore the implications of Sec. 306.)

C. What is Tillies basis in her remaining common and preferred shares after the sale? When does her holding period for the preferred shares begin?

Reference no: EM13916603

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