Last year you purchased 100 shares of stock in your favorite company, ABC Corp., for your investment portfolio. This year ABC’s board of directors decided to split the stock, so you received – even without asking! – a “stock dividend” of another 100 ABC shares. Now you have 200 shares! On the day of the above event, ABC stock closed at $60 per share on the New York Stock Exchange. Meaning that you will have to report $6,000 of gross in-come on your tax return for this year, right? Wrong? Why?
Last year you purchased 100 shares of stock in your favorite company, ABC Corp., for your investment portfolio. This year ABC’s board of directors decided to split the stock, so you received – even without asking! – a “stock dividend” of another 100 ABC shares. Now you have 200 shares! On the day of the above event, ABC stock closed at $60 per share on the New York Stock Exchange. Meaning that you will have to report $6,000 of gross in-come on your tax return for this year, right? Wrong? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Last year you purchased 100 shares of stock in your favorite company, ABC Corp., for your investment portfolio. This year ABC’s board of directors decided to split the stock, so you received – even without asking! – a “stock dividend” of another 100 ABC shares. Now you have 200 shares!
On the day of the above event, ABC stock closed at $60 per share on the New York Stock Exchange. Meaning that you will have to report $6,000 of gross in-come on your tax return for this year, right? Wrong? Why?
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