McGraw-Hill's Taxation of Individuals and Business Entities 3rd Edition by Brian Spilker, Benjamin Ayers, John Robinson, Edmund Outslay, Ronald Worsham, John Barrick, Connie Weaver

Exercise 18

XYZ declared a $1 per share dividend on August 15.The date of record for the dividend was September 1 (the stock began selling ex-dividend on September 2).The dividend was paid on September 10.Ellis is a cash-method taxpayer.Determine if he must include the dividends in gross income under the following independent circumstances.
a.Ellis bought 100 shares of XYZ stock on August 1 for $21 per share.Ellis received $100 on September 10.Ellis still owns the shares at year-end.b.Ellis bought 100 shares of XYZ stock on August 1 for $21 per share.Ellis sold his XYZ shares on September 5 for $23 per share.Ellis received the $100 dividend on September 10 (note that even though Ellis didn't own the stock on September 10, he still received the dividend because he was the shareholder on the record date).c.Ellis bought 100 shares of XYZ stock for $22 per share on August 20.Ellis received the $100 dividend on September 10.Ellis still owns the shares at year-end.