Federal Tax Research 10th Edition by Steven Gill, Gerald Whittenburg, Roby Sawyers, Debra Sanders, William Raabe

Exercise 36

Dennis is an executive of Gold Corporation. He receives a one-for-one distribution of stock rights for each share of common stock he owns. On the date of distribution, the stock rights have a fair market value of $2 per right, and the stock has a fair market value of $20 per share. Dennis owns 10,000 shares of the stock with a basis of $5 per share. If Dennis does not make any special elections with regard to the stock rights, what is his basis in the rights
a. Locate the Code section(s) that deals with this situation. State the section number(s).
b. Review the Code section(s). Does it raise a need for new information to solve this question
c. Are you able to reach a conclusion about the research question from this Code section If so, what is your conclusion(s)