Whitney Wells owns 600 shares of Fargo Company stock. She purchased these shares in 2017 for $30 each. In 2019, she received 600 nontaxable stock rights to subscribe to 600 additional shares at $35/share. The fair market value of each right was $4 and the fair market value of each share of stock is

$40. Assume that Whitney exercises 300 of the rights and sells the rest for $4,500.

a. What is Whitney’s basis in the old stock?

What is the basis in the new stock?

b. What is Whitney’s basis in the old stock if the fair market value of each right was

$8 instead of $4? What is the basis in the new stock?

c. What is the amount of gain under the assumption in part

(b) if Whitney sells the 300 rights for $4,500?