Business, 26.03.2020 21:57 17795

Hoosier Corporation declared a 2-for-1 stock split to all shareholders of record on March 25 of this year. Hoosier reported current E&P of $600,000 and accumulated E&P of $3,000,000. The total fair market value of the stock distributed was $1,500,000. Barbara Bloomington owned 1,000 shares of Hoosier stock with a tax basis of $100 per share.

a. What amount of taxable dividend income, if any, does Barbara recognize in 2010? Assume the fair market value of the stock was $150 per share on March 25, 2010.
b. What is Barbara’s income tax basis in the new and existing stock she owns in Hoosier Corporation, assuming the distribution is tax-free?
c. How does the stock dividend affect Hoosier’s accumulated E&P at the beginning of 2011?

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Hoosier Corporation declared a 2-for-1 stock split to all shareholders of record on March 25 of this...

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