Question

Darryl, a cash basis taxpayer, gave 1,000 shares of Copper Company common stock to his daughter on September 29, 2019. Copper Company is a publicly held company that has declared a $2.00 per share dividend on September 30th every year for the last 20 years. Just as Darryl had expected, Copper Company declared a $2.00 per share dividend on September 30th, payable on October 15th, to stockholders of record as of October 10th. The daughter received the $2,000 dividend on October 18, 2019. a. The daughter must recognize the income because she owned the stock when the dividend was declared and she received the $2,000. b. Darryl must recognize the $2,000 dividend as his income because he constructively received the dividend. c. Darryl must recognize $1,500 of the dividend because he owned the stock for three-fourths of the year. d. Darryl must recognize the income of $2,000 because the purpose of the gift was to avoid taxes. e. None of these choices are correct.

Answer 1

Answer:

Correct option :a. The daughter must recognize the income because she owned the stock when the dividend was declared and she received the $2,000.

Explanation:

Based on the information given we were told Darryl gave 1,000 shares of stock to his daughter in the month of September 29, 2019 in which Darryl daughter also received the amount of $2,000 dividend on October 18 of the same year which means that Darryl daughter have to recognize the income reason been that the daughter owned the common stock when the dividend was been declared and she as well received the amount of $2,000.