Trent Corporations single class of stock is owned equally by Juan and Miguel, who are unrelated. Juan

Question:

Trent Corporation’s single class of stock is owned equally by Juan and Miguel, who are unrelated. Juan has a $125,000 basis in his 1,000 Trent shares, and Miguel has a $300,000 basis in his 1,000 Trent shares. In a single transaction, Adams exchanges 2,500 shares of its voting for each shareholder’s Trent stock. Immediately after the reorganization, each shareholder owns 15% of the Adams stock, which has a FMV of $100 per share.
a. What are the amount and character of each shareholder’s recognized gain or loss?
b. What is each shareholder’s basis in his Adams stock?
c. What is Adams’s basis in the Trent stock?
d. How would your answers to Parts a–c change if Adams instead exchanged 2,000 shares of Adams and $50,000 in cash for each shareholder’s Trent stock?
Common Stock
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