At the beginning of the year, Calvin paid $5,000 for 60 shares of Eddington stock. In June, he received a $300 cash distribution with respect to the stock. His Form 1099-DIV reported that $170 was an ordinary dividend and $130 was a nontaxable return of capital. Compute Calvin's tax basis in his 60 shares at year-end.

Question

Quizplus · Accepted Answer

Calvin's initial basis in the stock was $5,000. The $130 nontaxable return of capital reduces his basis. Therefore, his tax basis at year-end is $5,000 - $130 = $4,870.

At the Beginning of the Year, Calvin Paid $5,000 for 60