What is her gain or loss and what is its character

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Antoinette owns 400 shares of common stock of Gertz Incorporated which she acquired on May 29, 2000, for $50,000. On April 24, 2013, Antoinette received 40 shares of Gertz’s common stock. The fair market value of the 40 shares on April 14, 2013, was $15,200. Gertz’s current E&P for 2013 was $30,000.

a. Assuming that the stock dividend was a proportionate dividend and no other distribution options were available, determine Antoinette’s taxable income and Antoinette’s basis in the 400 shares and the 40 shares, as well as each group’s holding period. If she sold the 40 shares for $16,000 on October 17, 2013, then what is her gain or loss and what is its character?

b. Compute Antoinette’s taxable income, basis in the shares and their holding periods assuming that the stock dividend was disproportionate. If she sold the 40 shares on October 17, 2013, for $14,000, then what is her gain or loss and what is its character?

Reference no: EM131492710

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