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5. Frank has 200 shares of XYZ, Inc. with a basis of $5,000 and a value of 7,500. He receives a tax-free stock dividend of
5. Frank has 200 shares of XYZ, Inc. with a basis of $5,000 and a value of 7,500. He receives a tax-free stock dividend of 50 additional shares, worth $2,500. (a) After the stock dividend, what is his per share basis in the stock? In other words, if he sells 1 share of stock, what is the basis in that share for determining the gain on the sale of the share? (b) Suppose it was a tax-free dividend, but the 50 new shares were of preferred stock - what would his basis be in common stock and in the preferred stock
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