This year, Jenko Incorporated, a calendar year taxpayer, issued 1,000 shares of its publicly traded stock as a bonus to its employee, Linn. On the date of issuance, the stock's fair market value was $25,000, and Linn's ownership rights in the stock were unrestricted. Which of the following statements is true?
Multiple Choice
Linn does not recognize income on receipt of the stock, and the tax basis in the stock is zero.
Linn does not recognize income on receipt of the stock, and the tax basis in the stock is $25,000.
Linn recognizes $25,000 of ordinary income on receipt of the stock, and the tax basis in the stock is $25,000.
None of these choices are true.
