On July 7,2010,Brad received nontaxable stock rights with a fair market value of $4,000.His adjusted basis in the stock is $20,000.Which of the following is correct?
A)If the fair market value of the stock is $25,000,Brad must allocate part of the stock basis to the stock rights.
B)If the fair market value of the stock is $30,000,Brad does not have to allocate part of the stock basis to the stock rights.
C)If the fair market value of the stock is $27,000,Brad does not have to allocate part of the stock basis to the stock rights,but he may elect to do so.
D)Only a.and b.are correct.
E)a. ,b. ,and c.are correct.

Question

Quizplus · Accepted Answer

If the fair market value of the stock rights is less than 15% of the fair market value of the stock, Brad does not have to allocate part of the stock basis to the stock rights, but he may elect to do so. If the fair market value of the stock rights is 15% or more, he must allocate part of the stock basis to the stock rights.

On July 7,2010,Brad Received Nontaxable Stock Rights with a Fair