As of April 1, 2016, Taxpayer X owns 1000 shares of Corporation A stock and 500
ID: 2599047 • Letter: A
Question
As of April 1, 2016, Taxpayer X owns 1000 shares of Corporation A stock and 500 shares of Corporation B stock. On May 1, 2016 the board of directors of Corporation A declared a 5% stock dividend, without the option to receive cash, to shareholders of record on May 15, 2016, payable May 31, 2016. The value of the Corporation A stock is as follows:
May 1, 2016
$10
May 15, 2016
$15
May 31, 2016
$20
Also, on May 1, 2016 the board of directors of Corporation B declared a 10% stock dividend, with the option to receive cash, to shareholders of record on May 15, 2016, payable May 31, 2016. The value of the Corporation A stock is as follows:
May 1, 2016
$15
May 15, 2016
$20
May 31, 2016
$25
Taxpayer X made a gift of all of his Corporation B stock to Taxpayer Y on May 12, 2016.
Regardless of who is obligated to recognize the dividend income, what is the total amount of the dividends from Corporation A and Corporation B as a result of owning 1000 shares of Corporation A stock and 500 shares of Corporation B stock?
A.
None of these choices are correct.
B.
$1,750
C. $2,250
D.
$1,250
E.
$500
May 1, 2016
$10
May 15, 2016
$15
May 31, 2016
$20
Explanation / Answer
Answer : D. $1,250
Explanation : Eventhough Taxpayer X made a gift of all of his Corporation B stock to Taxpayer Y on May 12, 2016, still Corporation B has paid Stock dividend on these shares as the record date is May 15, 2016.
So, Stock dividend paid on Corporation A stock = 1000 * 5% * $10 = $500
Stock/Cash dividend paid on Corporation B stock = 500 * 10% * $15 = $750
Total dividend paid out = $1250
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