# Questions and Answers - 73479

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## smarttutor

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Kevin purchased 5,000 shares of Purple Corporation stock at \$10 per share. Two years later, he receives a 5% common stock dividend. At that time, the common stock of Purple Corporation had a fair market value of \$12.50 per share. What is the basis of the Purple Corporation stock, the per share basis, and gain recognized upon receipt of the common stock dividend?
a. \$50,000 basis in stock, \$10 basis per share for the original stock and \$0 basis per share for the dividend shares, \$0 recognized gain.
b. \$50,000 basis in stock, \$9.52 basis per share, \$0 recognized gain.
c. \$53,125 basis in stock, \$10 basis per share for the original stock and \$12.50 basis per share for the dividend shares, \$3,125 recognized gain.
d. \$53,125 basis in stock, \$10.12 basis per share, \$3,125 recognized gain.
e. None of the above.

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