Suleman purchased 100 shares of Green Corporation for $1,200. During the current year, Green declared a...

Suleman purchased 100 shares of Green Corporation for $1,200. During the current year, Green declared a nontaxable 5% stock dividend. What is the basis per share before and after the stock dividend is distributed (rounded)? (LABEL AND SHOW ALL WORK WITH CALCULATIONS)

A)

Before	After
$12	$11.43

B)

Before	After
$12	$12

C)

Before	After
$11	$12

D)

Before	After
$11.43	$12

Expert Solution

Solution:
		Clculation of Basis of Shares before the Stock Dividend

		Value of investment	$ 1,200
		Divide By	"/" By

		No. of shares Purchased	100

		Basis of Shares Befor Stock Dividend ($ 1200 / 100 Shares )	$ 12


		Clculation of Basis of Shares After the Stock Dividend
		Stock Dividend Declares	5%

		No. of shares received under stock Dividend = 100 Shares X 5% =	5 Shares


		Total Shares in hand after Stock Dividend = 100 Shares + 5 Shares =	105 Shares

		Basis of Shares After stock Dividend = Value of investment / No. of Shares in hand
		Basis of Shares After stock Dividend = $ 1,200 / 105 Shares
		Basis of Shares After stock Dividend = $ 11.43


	Answer = Option A = Before $ 12 ; After $ 11.43

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