When a corporation has occasion to bring out a new stock issue, the privilege may be given to the stockholders, as of record at the time, to subscribe for the new stock at a price less than the existing market quotations of the old stock. The number of shares of new stock to which one may subscribe depends upon the number of original shares which he owns. The privilege attached to each original share is one " right"; it is used in the plural when two or more original shares are held. Such a privilege generally has a value - the value largely depending, of course, upon the price at which the original stock is selling in the market - and if the stockholder does not wish to avail himself of it, he can usually sell the "right " to subscribe in his stead to some other party. "Rights" are dealt in much the same as other securities. They may apply to other securities than shares of stock. (See " Arbitrage.")

When a stockholder receives "rights" he should not consider them as dividends, even although they have a value, for it is usual for the old shares to decline in the market about the equivalent of the value of the "rights."

A peculiar situation exists in Massachusetts where the Tax Commissioner is obliged by law to treat the proceeds of the sale of rights as income, and the Probate Courts treat it as part of the principal.

In order to determine the value of a "right," the following rule is applied:

"From the market price of the old stock subtract the subscription price of the new; divide this remainder by a number one greater than the number of old shares required to secure one new share."