Stock Dividends
Response to the following problem:
In 1998, Patrick paid $1,200 for 100 shares of UPI common stock. In the current year, UPI offers Patrick the choice between a $50 cash dividend or 8 additional shares of common stock valued at $9 a share. Patrick opts for the stock dividend.
a. What is Patrick's basis in each of the 108 shares he now owns?
b. How would your answer to Part a. change if Patrick did not have the option of a cash dividend?