Question: A shareholder is issued two warrants in a transaction qualifying as a nontaxable stock dividend. The shareholder owns 10 shares with a basis of $4

A shareholder is issued two warrants in a transaction qualifying as a nontaxable stock dividend. The shareholder owns 10 shares with a basis of $4 each and the dividend is made when each has a value of $10. Each warrant allows the holder to purchase one share for $5. No separate elections are made by the shareholder. Immediately after the dividend, what is the shareholder’s basis in each warrant?

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