Gina owns 100 shares of XYZ common stock with a $12,000 basis and a $25,000 FMV. She receives 100 stock rights with a total FMV of $15,000. Answer the following:a.What is the basis of the 100 shares of stock?b.What is the basis of the 100 stock rights?
What will be an ideal response?
Because the FMV of the stock rights is at least 15% of the FMV of the stock, the $12,000 basis must be allocated between the stock rights and the stock.
| a. | The basis of the stock is: [($25,000/$40,000) × $12,000] = $7,500. |
| b. | The basis of the stock rights is: [($15,000/$40,000) × $12,000] = $4,500. |
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