Ask Question
21 August, 09:12

A customer has purchased 1,000 shares of ABC stock at $44 per share, paying a commission of $1.00 per share for the transaction. ABC stock declares a 20% stock dividend. When the dividend is paid, the tax status of the investment is: A 1,000 shares held at a cost basis of $44 per share B 1,000 shares held at a cost basis of $45 per share C 1,200 shares held at a cost basis of $36.66 per share D 1,200 shares held at a cost basis of $37.50 per share

+2
Answers (1)
  1. 21 August, 11:14
    0
    D) 1,200 shares held at a cost basis of $37.50 per share

    Explanation:

    Since the company paid a stock dividend, it increased the number of stocks held by the stockholders. The investor initially had 1,000 shares plus a 20% dividend = 1,000 x 1.2 = 1,200 shares. Since each stock should theoretically be worth less, his/her basis should decrease. The basis for each stock was $44 (price) + $1 (commission) = $45, after the dividend is paid it will be adjusted to $45 / 1.2 = $37.50 per stock
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “A customer has purchased 1,000 shares of ABC stock at $44 per share, paying a commission of $1.00 per share for the transaction. ABC stock ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers