Mike's basis in his stock in Tan Corporation is $75,000.He receives nontaxable stock rights (fair market value of $20,000) when the value of the stock is $100,000.What is the basis for the stock rights?
A)$0.
B)$12,500.
C)$15,000.
D)The basis is $0 unless the taxpayer elects to allocate a portion of the cost of the stock to the rights.
E)None of the above.

Question

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The Answer of Mike's basis in his stock in Tan Corporation is $75,000.He receives nontaxable stock rights (fair market value of $20,000) when the value of the stock is $100,000.What is the basis for the stock rights?
A)$0.
B)$12,500.
C)$15,000.
D)The basis is $0 unless the taxpayer elects to allocate a portion of the cost of the stock to the rights.
E)None of the above.

Mike's Basis in His Stock in Tan Corporation Is $75,000