Question

"In January, 20XX a customer buys 100 shares of ABC stock at $30 per share and pays a $2 commission per share. The customer receives $1 in cash dividends during the year. The customer's cost basis in the stock is:"

Answer 1

$32 per share

Step-by-step explanation:

Calculation for ABC Stock customer's cost basis

In a situation where the stock is been purchased, any commission paid out is not deductible because it is part of the cost basis of the shares.

Therefore , the cost basis for tax purposes will be:

$30 per share + $2 commission

= $32 per share

Hence the $1 dividend received will be included in taxable income for this year, and would not be part of the stock's cost basis.