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Lilah owns 400 shares and Juliet owns 600 shares of LJ Inc ( LJI ) stock. Lilah's basis in her shares is $ 4,000 ( $10 per share.) Juliet's basis in her shares is $9,000 ( $15 per share .) On July 1, 2019 LJI pays a 15 % stock dividend to Lilah and Juliet . Lilah receives 60 shares and Juliet receives 90 shares . Each of these shares is worth $25. Lji has $1,000,000 of E&P.What amount of dividend income does Lilah report on her 2019 tax return and what is her total tax basis tax basis in her 460 shares of LJI ?

A.

Lilah reports $1500 of dividend income and has a tax basis of $5500 in her shares.

B.

Lilah reports no dividend income and has a tax basis of $5500 in her shares.

C.

Lilah reports $1500 of dividend income and has a tax basis of $4000 in her shares.

D.

Lilah reports no dividend income and has a tax basis of $4000 in her shares.