On feb. 1, 2018, the board of directors of x corp. declares a dividend of $2 per share to shareholders of record as of march 1, 2018, payable as of april 1, 2018. taxpayer-a transfers 200 shares to taxpayer-b by gift on jan. 1, 2018 and sells another 200 shares to taxpayer-b on feb. 15, 2018. according to the united states district court, as discussed in class, how much, if any, dividend income must taxpayer-b realize in 2018 (both taxpayer-a and taxpayer-b are cash basis)? a.$400b. $0c. $800d. none of the choices are correcte. $200

c. $800

Explanation:

Taxpayer B was the owner of first 200 shares on Jan 1, 2018. So, the dividend declared by the company will become taxable ( 200* $2 = $400).

Company declared another dividend on Feb 1, 2018. the declaration stated that the dividend of $2 per share would be payable to shareholders who are in record on March 1, 2018. Taxpayer A transferred 200 shares to Taxpayer B on Feb 15, 2018 so Taxpayer B was in record of Company on March 1, 2018. Hence, B has to pay tax on dividend of another 200 shares ( 200* $2 = $400)

so, $400 + $400= $800