. Pursuant to a Type C reorganization, Alice exchanged 1,000 shares in Blades, Inc., with a basis...
Question:
. Pursuant to a Type C reorganization, Alice exchanged 1,000 shares in Blades, Inc., with a basis of $11,000 and a fair market value of $9,000 for stock in Razors, Inc. worth $8,500 and cash of $1,000. Blades earnings and profits were substantial. Alice recognizes:
a. dividend income of $1,000. |
b. long-term capital loss of $1,500. |
c. long-term capital gain of $1,000. |
d. no gain or loss. |
35. Trampolines, Inc. transfers all its assets to a new corporation, Trogs, Inc., in exchange for voting stock of Trogs, Inc. The shareholders of Trampolines, Inc. turn in their Trampolines, Inc. stock for all the shares of Trogs, Inc. There is a business purpose for the transaction, and Trogs, Inc. will use all of Trampolines, Inc. assets in the same business in which Trampolines, Inc. was engaged. The transaction meets the definition of a.
a Type C reorganization. |
b. both a Type C and a Type D reorganization. |
c. a Type C, D, and F reorganization. |
d. a Type A, C, D, and F reorganization. |
36. Ivory, Inc. acquires all the assets of Mammoth, Inc. If the consideration paid is as follows, which transaction qualifies as a Type C reorganization, assuming all other requirements are met to qualify as a reorganization under Code Section 368(a)(1)(C)?
a. Voting common stock of Ivory, Inc. worth $200,000 and the assumption of $800,000 of Mammoth Inc.'s liabilities. |
b. Voting convertible preferred stock of Ivory, Inc. with a fair market value of $550,000 and warrants with a fair market value of $450,000 to purchase stock in Ivory, Inc.'s subsidiary. |
c. Voting common stock in Ivory, Inc. with a fair market value of $750,000 and assumption of liabilities of Mammoth Inc. of $200,000, plus $50,000 in cash. |
d. Nonvoting convertible preferred stock in Ivory, Inc. worth $500,000 and cash of $500,000. |
Please show solution or explanation.
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th Edition
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan