Question

An individual shareholder owns 3,000 shares of Baxter Corporation common stock with a basis of $10 per share. She receives a nontaxable 5% stock dividend. The basis per share of the common stock after the stock dividend isA.$9.00.B.$10.00.C.$9.52.D.$9.50.

Answer 1

C.$9.52

Step-by-step explanation:

Existing shares of individual shareholder = 3,000

Stock dividend received = 5%

Number of shares received in stock dividend = Existing shares of individual shareholder x Stock dividend received

= 3,000 x 5%

= 150

Number of shares after stock dividend = 3,000 + 150

= 3,150

The shareholder has basis of $10 per share before stock dividend,

total basis before stock dividend = 3,000 x 10

= $30,000

Total basis will remain same after stock dividend.

Basis per share after stock dividend = Total basis before stock dividend/Number of shares after stock dividend

= 30,000/3,150

= $9.52

Therefore, The basis per share of the common stock after the stock dividend is %9.52