Jason Bright owns 500 shares of Latec Inc. These were purchased several years ago at $15 per share, a total cost of $7,500. On June 30, 2020, the Shareholder's Equity accounts of Latec were as follows: On this date, Latec declares and pays a 5 percent non-eligible stock dividend. As the shares are trading at $18 per share, the Company increases PUC by $90,000 [(5%)(100,000)($18)].
Determine the effect of this transaction on Jason's 2020 Net Income For Tax Purposes and 2020 federal Tax Payable. In addition, determine the adjusted cost base per share of his Latec Inc. holding.

Question

Jason Bright owns 500 shares of Latec Inc. These were purchased several years ago at $15 per share, a total cost of $7,500. On June 30, 2020, the Shareholder's Equity accounts of Latec were as follows:  On this date, Latec declares and pays a 5 percent non-eligible stock dividend. As the shares are trading at $18 per share, the Company increases PUC by $90,000 [(5%)(100,000)($18)].
Determine the effect of this transaction on Jason's 2020 Net Income For Tax Purposes and 2020 federal Tax Payable. In addition, determine the adjusted cost base per share of his Latec Inc. holding.

Quizplus · Accepted Answer

The Answer of Jason Bright owns 500 shares of Latec Inc. These were purchased several years ago at $15 per share, a total cost of $7,500. On June 30, 2020, the Shareholder's Equity accounts of Latec were as follows:  On this date, Latec declares and pays a 5 percent non-eligible stock dividend. As the shares are trading at $18 per share, the Company increases PUC by $90,000 [(5%)(100,000)($18)].
Determine the effect of this transaction on Jason's 2020 Net Income For Tax Purposes and 2020 federal Tax Payable. In addition, determine the adjusted cost base per share of his Latec Inc. holding.

Jason Bright Owns 500 Shares of Latec Inc