1. X Corp and Y Corp each have the following identical characteristics: (1) cash of $100; (2) other assets with an AB of $100 and FMV of $300; (3) no liabilities (yeah); and (4) E&Ps of $100. Each has outstanding 100 shares worth $4 per share.

A owns all X Corp stock with an AB of $200. A owns 51% of the stock of Y Corp with an AB of $100; unrelated 3rd parties own the remaining 49% of Y Corp. A sells all of his X Corp stock to Y Corp for $400.

1. What are the consequences to A?
2. What are the consequences to Y Corp, i.e., what’s Y’s basis in the X shares?

Answer rating: 100% (QA)

A The consequences to A is that at last he is left wit... View the full answer