A corporation with common stock outstanding declares a nontaxable dividend payable in rights to subscribe to common stock on June 30 of the current year. Each right entitles the holder to purchase one share of stock for $55. One right is issued for every share of stock owned. Thomas owns 100 shares of stock purchased 10 years ago for $2,800. At the time of the distribution of the rights, the market value of the common stock is $83 per share and the market value of the rights is $11 per right. Thomas receives 100 rights. On September 30, he exercises 75 of the rights and sells the remaining 25 rights for $13 per right. If required, round your answers to two decimal places. If Nexsen does not allocate his original stock basis to the rights, his basis of the new stock is $__________ . The holding period of the new stock begins on the date . The sale of the rights produces capital gain of $________

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Answer:

PURCHASE PRICE OF THE RIGHT STOCK (75 * $90) = $6750

LESS- SELL PRICE OF THE RIGHT (25 * $22) =($550)

TOTAL COST OF THE RIGHT STOCK = $6200

NO OF RIGHT STOCK PURCHASED = 75

PRICE PER STOCK = $82.67

SALE PRICE OF THE RIGHT (25 * $22) =$550

LESS- PURCHASE PRICE OF RIGHT = NIL

TOTAL CAPITAL GAIN ON SALE = $550