Mike's Basis in His Stock in Tan Corporation Is $75,000

Multiple Choice

Mike's basis in his stock in Tan Corporation is $75,000.He receives nontaxable stock rights (fair market value of $20,000) when the value of the stock is $100,000.What is the basis for the stock rights?

A) $0.
B) $12,500.
C) $15,000.
D) The basis is $0 unless the taxpayer elects to allocate a portion of the cost of the stock to the rights.
E) None of the above.