Julio owns 1,000 shares of stock in Hillside Corporation, worth $50 per share. The 2,000 shares were purchased in 2005 for $10 per share. In 2014, the corporation issues a 10% stock dividend to all common shareholders with an option of receiving either the stock worth $10,000 or $12,000 cash. Julio selects the stock. Julio's gross income from the above is:
a. $0.
b. $10,000.
c. $12,000.
d. Julio can elect to recognize income of $12,000 or reduce his basis in the stock by $10,000.
e. None of the above.
Answer: B. $10,000