Problem
Kate provides you data for the following transactions that occur in order:
On January 1, Kate purchased 2,000 shares of Cherry stock for $40,000.
On March 1, it issued a 25% stock dividend. The fair market value of the stock at dividend was $13 per share.
On April 1, the stock issued a $1.50 cash dividend per share. Kate deposited the dividend in her bank.
On July 1, Kate sold 40% stock. The fair market value at the time of the sale was $18.50.
• Calculate the basis per share on April 1
• Calculate the basis of the remaining stock on July 1
• Calculate the gain Kate will report on July 1
• Calculate the total amount of dividends Kate will report for tax this year.