e_rock494
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Joined: 15 Aug 2008
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| Posted: 25 Aug 2008 at 19:10 | IP Logged
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Carter purchased 100 shares of stock for $50 per share. Ten years later, Carter died on February 1 and bequethed the 100 shares of stock to a relative, Boone, when the stock had a market price of $100 per share. On year later, on April 1, the stock split 2 to 1. Boone gave 100 shares of the stock to another of Carter's relatives, Dixon, on June 1 that same year, when the market value of the stock was $150 per share. What was Dixon's basis in the 100 shares of stock when acquired on June 1?
A. 5,000
B. 5,100
C. 10,000
D. 15,000
Answer is A.: The requirement is to determine Dixon's basis in the 100 shares when acquired on June 1. Boone (who inherited Carter's stock) would have a basis for the 100 shares equal to the shares' $1,000(????) FMV at the date of Carter's death. The subsequent 2 for 1 stock split on april 1 would be nontaxable to Boone so Boone would then have a total of 200 shares with a basis of $1,000(???), or $50 per share. When Boone made a gift of 100 shares of stock to Dixon on June 1, the shares would have a transferred basis from Boone to Dixon of 100 x $50 = $5,000.
My question is where in the heck are they getting $1,000 FMV on date of Boone's death?? Shouldn't it be $10,000 (100 shares x $100)??
Ohhhh, wait. I just typed up that whole thing and figured it out I think. They meant $10,000...b/c $10,000/200 shares = $50 per share.
Just be aware of this question's explanation...I'm pretty sure it is a released multi.
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Topic: Basis in stock at bequeth
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