JH corporation declares a 10% stock dividend when its stock is selling for $100 per share. As a result of the stock dividend, the per-share stock value declines to $90.91 (JH’s market capitalization remains the same, but it is spread over 10% more shares). Joe owns 100 shares of JH corporation and Joe has a basis of $1,100 for those shares. Joe receives 10 shares as a result of the stock dividend. How does the stock dividend affect Joe? Specifically, determine Joe’s basis per share.

Part 2. Assume the same fact as in Part 1 except that JH declares a 4-for-1 stock split. Determine Joe’s per basis.

Part 3. Joe bought 1,000 shares of common stock two years ago for $10,000. In the current tax year, Joe receives a nontaxable preferred stock dividend of 100 shares. The preferred stock has a fair market value of $1,000 and the common stock, on which the preferred is distributed, has a fair market value of $19,000. Determine Joe’s basis in common and preferred stock.