El Toro Corporation declared a common stock distribution to all shareholders of record on June 30, 20X3. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 400 shares of El Toro stock with a tax basis of $69 per share. The fair market value of the El Toro stock was $109 per share on June 30, 20X3. What are the tax consequences of the stock distribution to Raoul?

1. $0 dividend income and a tax basis in the new stock of $109 per share.
2. $0 dividend income and a tax basis in the new stock of $69 per share.
3. $0 dividend income and a tax basis in the new stock of $46 per share.
4. $21,800 dividend and a tax basis in the new stock of $109 per share.