What is Madison income tax basis

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Question - Badger Corporation declared a stock distribution to all shareholders of record on March 25 of this year. Shareholders will receive one share of Badger stock for each 10 shares of stock they already own. Madison Cheesehead owns 1,000 shares of Badger stock with a tax basis of $100 per share. The fair market value of the Badger stock was $110 per share on March 25 of this year. (Leave no answer blank. Enter zero if applicable.)

a. What amount of taxable dividend income, if any, does Madison recognize this year?

b. What is Madison's income tax basis in her new and existing stock in Badger Corporation, assuming the distribution is nontaxable? (Round your answer to the nearest whole number.)

c. How would you answer parts (a) and (b) if Badger offered shareholders a choice between receiving one additional share of Badger stock for each 10 Badger shares held or receiving $120 cash in lieu of an additional share of stock?

Reference no: EM132654180

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