Question

In: Accounting

Tamika owned 200 shares of Gold Corporation with a basis of $12,000 and a FMV of...

Tamika owned 200 shares of Gold Corporation with a basis of $12,000 and a FMV of $24,000. Tamika received 20 stock rights as a nontaxable distribution with a total FMV of $8,000. Tamika sold the stock rights for $4,000. Tamika's gain or loss on the sale was (LABEL AND SHOW ALL WORK WITH CALCULATIONS)

A) $1,000.

B) $3,000.

C) $4,000.

D) ($4,000).

Solutions

Expert Solution

Working:
Stock Rights: Stock rights is a right which is given to existing shareholder's of
any company in proportion of there existing share holding.
These rights can be exercised by existing shareholder's by himself and even
he can sale his rights
In the given case fair market value of the stock rights = $                    8,000
Sale value of the Rights = $                    4,000
Solution:
CALCULATION OF GAIN OR LOSS ON SALE OF STOCK RIGHTS
Sale Value of the Stock Rights $                    4,000
Less: Cost of the Stock Rights of Tamika $                           -  
Gain on Sale of Stock Rights $                    4,000
Answer = Option C = $ 4,000

ekkarill92 answered 2 years ago
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