Carol received nontaxable stock rights on May 14,2010.She allocated $6,000 of the $40,000 basis of the associated stock to the stock rights.The stock rights expire on September 14,2010.What is Carol's recognized loss on the expiration of the stock rights?
A)$0.
B)$6,000.
C)$34,000.
D)$40,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Since the stock rights were nontaxable, Carol does not have a basis in them. Therefore, the loss on the expiration of the stock rights is not recognized for tax purposes.

Carol Received Nontaxable Stock Rights on May 14,2010