Question

Badger Corporation declared a stock distribution to all shareholders of record on March 25 of this year. Shareholders will receive one share of Badger stock for each 10 shares of stock they already own. Madison Cheesehead owns 1,000 shares of Badger stock with a tax basis of $100 per share. The fair market value of the Badger stock was $110 per share on March 25 of this year. (Leave no answer blank. Enter zero if applicable.) What amount of taxable dividend income, if any, does Madison recognize in 2009?

Answer 1

Answer:

The stock dividends are not taxable in 2009 for this case

Explanation:

A. According to the US taxatation regulation in this particular case the stock dividend is not taxable because it is pro rata to all the shareholders.

pro rata means proportional.