Question

a customer holds 1000 shares of abc stock valued at 80 in a margin account. the debit balance in the account is 35000. abc declares and pays a 20 percent stock dividend. the tax consequence of the distribution to the investor will be:

Answer 1

Answer:

Reduction of the cost per share

Explanation:

Based on the Internal Revenue service (IRS) we have that the stock dividens can't be taxable when anyone recieve it.

If we analyze the statement makes sense because the shareholder not recieve money from the market or the company ABC on this case, and we have appreciation just as a possibility.

So based on this info the stock dividens will be reduced if we analyze the costs per share. So then we need to have a decrease on the cost basis for the customers.