What are the tax consequences to Euclid from the following independent events?
a. Euclid bought 500 shares of common stock five years ago for $50,000. This year, Euclid receives 20 shares of common stock as a nontaxable stock dividend. What is Euclid's basis per share after this event?
b. Assume instead that Euclid received a nontaxable preferred stock dividend of 20 shares. The preferred stock has a fair market value of $5,000 and the common stock, on which the preferred is distributed, has a fair market value of $75,000.