Super Xtra Inc. is publicly held. One of its shareholders, Fred, owns 100 shares of common stock with a basis of $5,000 and a value of $12,000. On October 17 oft his year, Fred receives 25 rights (to buy 25 new shares of stock). Each right is worth $12.

a. Does Fred have any gross income?

b. What is Fred’s basis in his rights?

c. When does the rights’ holding period start?

d. What difference would it make if Fred could have taken a $300 debenture in lieu of the rights, but did not?