Bat Corporation Distributes Stock Rights with a $20,000 FMV to Its

Multiple Choice

Bat Corporation distributes stock rights with a $20,000 FMV to its common stock shareholders. The $20,000 value of the stock rights at the time of distribution is less than 15% of the value of the underlying stock. Which of the following statements is true?

A) A shareholder must allocate basis to the rights based on the relative FMVs of the stock and the rights.
B) A shareholder cannot allocate any basis to the rights.
C) The basis in the rights is zero unless a shareholder makes a valid election to allocate basis to the rights.
D) The holding period for the rights begins on the day the rights are distributed in all cases.