Reference no: EM132874252

Question - On June 1, Public Corp. X common stock is selling for $15 per share. On that date, X declares a dividend of $1 per share, payable on June 12 to shareholders of record as of June 8. Investor Corporation Y purchases 1,000 shares of X for $15,000 on June 3 (two days before the ex-dividend date of June 5), collects a $1,000 dividend on June 12 and sells the stock for $14,000 on June 15.

1. What are the tax consequences to Y?

2. What result in 1, above, if Y sold the stock on December 1, instead of June 15?

3. What result in 2, above, if X had paid a second $1 per share dividend on August 15, and the ex-dividend date was August 5?

4. What result in 3, above, if the August dividend is $2 per share but Y holds the X stock for 25 months before selling it?

5. What result if Y purchased the X stock by borrowing the $15,000, secured by the stock, and Y paid $1,200 of interest during the year and received $1,000 of dividends?

6. What result in 5, above, if Y had borrowed only $7,500 of the $15,000 used to buy the stock and paid $600 of interest during the year? The DRD is reduced by 50% because the debt used to purchase the stock is 50%.