Question

Moss Corporation has a single class of common stock outstanding. Tanya owns 1,000 ​shares, which she purchased five years ago for $170,000. Moss declares a stock dividend payable in 8​% preferred stock having a $230 par value. Each shareholder receives one share of preferred stock for ten shares of common stock. On the distribution

date—December 16 of the current year—the common stock was worth $437 per​ share, and the preferred stock was worth $230 per share. On April 1 of the current​ year, Tanya sells half of her preferred stock for $8,500.

Requirement a. How much income must Tanya recognize when she receives the stock​ dividend?

Tanya will recognize

$

in income when she receives the stock dividend.

Requirement b. How much gain or loss must Tanya recognize when she sells the preferred​ stock? (Ignore the implications of Sec.​ 306.) ​(Do not round intermediary calculations. Only round the amount you input in the cells to the nearest cent. Use parentheses or a minus sign for a​ loss.)

Selling price	-	Basis of stock	=	Amount recognized
	-		=

Requirement c. What is Tanya basis in her remaining common and preferred shares after the​ sale? When does her holding period for the preferred shares​ begin? ​(Do not round interim calculations and round your final answer to the nearest​cent.)

Tanya common share basis is $		and her remaining preferred share basis is $		. Her holding
period for the preferred shares			.

Answer 1