Convertible preferred stock dividend

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On September 1, 2008, Melissa paid $50,000 for 500 shares of WH Inc. common stock. On October 15, 2010, Melissa received a taxable 10% convertible preferred stock dividend (i.e., 50 shares). On October 15, 2010, that convertible preferred stock was trading on the market for $75 a share. On November 7, 2010, Melissa sold the 50 shares received on October 15, 2010. What is the basis of the 50 shares Melissa sold on November 7, 2010?

a. $0

b. $3,750 ($75 x 50)

c. $4,545.45 ($90.91 x 50)

d. $5,000 ($100 x 50)

Reference no: EM13127455

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