The Ajax Corporation distributes 50 shares of its preferred stock to shareholder Thomas Turner, who owns 100 shares of Ajax common stock. The distribution qualifies as a nontaxable stock dividend. On the date of distribution, the Ajax common stock has a market value per share of $10 and the preferred stock has a market value per share of $3. Assume that Thomas has pre- Distribution basis of $5,000 for his common stock. What will be Thomas' basis per share for the preferred stock after accounting for the tax-free distribution?

1. 1000

2. 650

3. 450

4. 150

Answer rating: 100% (QA)

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