On June 30, 2020, the Shareholders' Equity of Mondo Inc. is as follows: On this date, the Company declares a 10 percent stock dividend. This dividend is not designated as eligible. At this time, the shares are trading at $27 per share. The Company increases its PUC by the fair market value of the new shares issued.
Jerry Folder is holding 1,000 of the Mondo shares which he acquired several years ago at a cost of $17 per share. Determine the effect of this transaction on Jerry's 2020 Net Income For Tax Purposes and 2020 federal Tax Payable. In addition, determine the adjusted cost base per share of his Mondo Inc. holding.

Question

On June 30, 2020, the Shareholders' Equity of Mondo Inc. is as follows:  On this date, the Company declares a 10 percent stock dividend. This dividend is not designated as eligible. At this time, the shares are trading at $27 per share. The Company increases its PUC by the fair market value of the new shares issued.
Jerry Folder is holding 1,000 of the Mondo shares which he acquired several years ago at a cost of $17 per share. Determine the effect of this transaction on Jerry's 2020 Net Income For Tax Purposes and 2020 federal Tax Payable. In addition, determine the adjusted cost base per share of his Mondo Inc. holding.

Quizplus · Accepted Answer

The Answer of On June 30, 2020, the Shareholders' Equity of Mondo Inc. is as follows:  On this date, the Company declares a 10 percent stock dividend. This dividend is not designated as eligible. At this time, the shares are trading at $27 per share. The Company increases its PUC by the fair market value of the new shares issued.
Jerry Folder is holding 1,000 of the Mondo shares which he acquired several years ago at a cost of $17 per share. Determine the effect of this transaction on Jerry's 2020 Net Income For Tax Purposes and 2020 federal Tax Payable. In addition, determine the adjusted cost base per share of his Mondo Inc. holding.