Additional shares of identical common stock


On September 5, 2007, Michael paid $5,500 for 100 shares of TXX-5761 Inc. common stock. On June 13, 2013, Michael received a nontaxable 10% common stock dividend (i.e., 10 additional shares of identical common stock). On June 13, 2013, TXX-5761 Inc. the common stock was trading on the market for $44 a share. On November 15, 2013, Michael sold the 10 shares he received on June 13, 2013 to Yessenia. What is the basis of the 10 shares Michael sold to Yessenia?

a. $550 ($55 x 10)

b. $500 ($50 x 10)

c. $440 ($44 x 10)

d. $0

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Accounting Basics: Additional shares of identical common stock
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