Megan owns 200 of the 1,000 shares of Seabeach Corp. her basis is $10,000. The corporation declares a 10% stock dividend to the common stock holders. Suppose instead Megan and the other common stock holders received100 shares of nonvoting common shares as a dividend. Immediately after the distribution Megan’s old common shares were worth $90,000 and the new nonvoting shares were worth $10,000. 

What is Megan’s basis in the new shares received? 

What is Megan’s holding period in the new shares received? 

Is the distribution taxable to Megan?

Answer rating: 100% (QA)

a Megans basis for new shares is NIL because for new shares Megan has not p... View the full answer