Charlie received one warrant (right) to purchase a share of common stock for each ten shares she owned in Ludlow Inc. as a

“dividend.” The exercise price was $70, the price of the stock was $54, and the value of the warrant was $7. Charlie makes no elections. What are the tax consequences to Charlie and Ludlow if:

a. Charlie’s warrants expire worthless?

b. Charlie exercised the warrants when the stock price was $85?

c. Charlie sold the warrants for $12 a share?