Question

Jasmin purchased 100 shares of Pinkstey Corporation (publicly traded company) on January 1 of year 1 for $5,000. The FMV of the shares at the end of year 1 was $6,000. On January 1 year 4, Pinkstey Corporation declared a 2-for-1 stock split when the fair market value of the stock was $65 per share. On January 1 of year 5, Jasmin sold all of her Pinkstey Corporation stock when the fair market value was $40 per share. Which of the folowing statements is true? a. Jasmin reports $6,500 in gross income for the 2-for-1 stock split in year 4 b. Jasmin's basis in the Pinkstey Corporation stock at the end of year 4 is $65/ share. c. Jasmin has no taxable income for the Pinkstey Corporation stock in year 4 d. Jasmin owns 100 shares in Pinkstey Corporation stock at the end of year 4

Answer 1

Answer:

Option C=> Jasmin has no taxable income for the Pinkstey Corporation stock in year 4.

Explanation:

So, here are the main information given in the question above that is going help us on solving the question and they are;

(1)."Jasmin purchased 100 shares of Pinkstey Corporation (publicly traded company) on January 1 of year 1 for $5,000."

(2). ''The FMV of the shares at the end of year 1 was $6,000.''

(3). "On January 1 year 4, Pinkstey Corporation declared a 2-for-1 stock split when the fair market value of the stock was $65 per share."

(4)." On January 1 of year 5, Jasmin sold all of her Pinkstey Corporation stock when the fair market value was $40 per share."

So, in the statement (3) above where Pinkstey Corporation declared a 2-for-1 stock split, Jasmine will no longer receive income for a period of the 4th year.

Also, Jasmine now have 200 shares instead of the 100 shares originally purchased in statement (1) above in Pinkstey Corporation.