Question

In January, 20XX a customer buys 100 shares of ABC stock at $50 per share and pays a $2 commission per share. The customer receives $2 in cash dividends during the year. The customer's cost basis in the stock is:________. A. $48 per share B. $50 per share C. $52 per share D. $54 per share

Answer 1

Answer:

C) $52 per share

Explanation:

The cost basis of the stock includes the purchasing price + all commissions paid to the broker = $50 + $2 = $52

The $2 per stock dividend that the stockholder received must be reported as ordinary income and is taxed as such. The cost basis is used to calculate capital gains or losses.