An individual shareholder owns 3,000 shares of Baxter Corporation common stock with a basis of $10 per share. She receives a nontaxable 5% stock dividend. The basis per share of the common stock after the stock dividend is

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Quizplus · Accepted Answer

The total basis remains the same, but the number of shares increases. New basis per share = Total basis / New number of shares = (3,000 shares * $10) / (3,000 shares * 1.05) = $9.52.

An Individual Shareholder Owns 3,000 Shares of Baxter Corporation Common