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In 2011, Kevin purchased 5,000 shares of Purple Corporation stock at $6 per share. In 2013, he receives a 5% preferred stock dividend. At the time of the stock dividend, the common stock of Purple Corporation has a fair market value of $9 and the preferred stock has a fair market value of $12 per share. Upon receipt of the preferred stock dividend:

What is Kevin's per share basis in the Purple Corporation stock?How much taxable income does Kevin recognize?

b. In 2013, Rob received a residence as a gift from his mother, Joan. At the time of the gift, the residence had a fair market value of $1,200,000, and Joan's basis in the residence was $500,000. Joan paid a tax of $40,000 on the gift. What is Rob's basis in the residence?

c. In 2013, Debbie receives stock as a gift from her uncle, Jerry. At the time of the gift, Jerry's adjusted basis in the stock is $27,000 and the fair market value of the stock is $17,000. One month later when the stock is worth $16,500, Debbie trades the stock for bonds with a fair market value of $15,000 and $1,500 cash (i.e. Debbie received a total value of $16,500 on the exchange, $15,000 in bonds and $1,500 in cash). What is Debbie's recognized gain or loss from the exchange? What is Debbie's basis in the bonds?

 

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