Scooby and Shaggy form Mistic, Inc. each receiving the following amount of Mistic stock (representing all of its outstanding stock) in exchange for the following property: Common Stock Preferred Stock Scooby 100 Shares 0 Shares Shaggy 0 Shares 100 Shares Scooby Shaggy Asset FMV $100,000 $150,000 Asset Basis 20,000 100,000 Shaggy can require Mistic to redeem all of his stock at his option at any time for 1.5 times the value of 50% of Mistic's fair market value. The preferred stock has an 8% cumulative dividend rate but is otherwise nonparticipating in dividends and and nonparticipating in growth. 

Compute both Scooby and Shaggy's realized and recognized gain or loss on the transactions above. And EXPLAIN.

Answer rating: 100% (QA)

To compute Scooby and Shaggys realized and recognized gains or losses we need to consider the fair m... View the full answer