[needhelpnow]

2 Questions here, which I feel are contradicting one another.

~~~~

1) On April 1, 2012 in connection with a recapitalization of Oakbook Corporation, Mary Roberts exchanges 500 shares that cost her $95,000 for 1000 shares of new stock worth $91,000 and bonds in the principal amount of $10,000 with a fair market value of $10,500. What is the amount of Roberts’ recognized gain during 2012?

a. 0

b. 6500

c. 10000

d. 10500

According to Wiley, answer is b. (91000+10500)-95000=6500

Is this correct? I have a feeling it might not be

~~~~~~

2) Ace Corp and Bate Corp combine in a qualifying reorganization and form Carr Corp., the only surviving corporation. This reorganization is tax-free to the:

Correct Answer on Wiley: Shareholder: Yes Corporations: Yes

I don’t get this. I thought for re-organzation, you have to recognize gain. In this Question corp reorganization is non taxable and cannot recognize gain, and the same goes for shareholders. WHY?!

[LongShot]

Not 100% sure, but thinking it's because the first question is a recapitalization. I think in a recapitalization, if a shareholder receives bonds then a gain will be recognized, but only to the extent of bonds received. I think. Then again, I've failed REG twice already, so if someone disagrees, you should probably go with their opinion:)

FAR - 75
AUD - 72; 87
REG - 64; 74; 84
BEC - 88

Done!!

[CPA soon]

The first questions looks answered correctly to me Asset Value given up VS Asset value received.

You have a acquisition, equity will remain the same. Why would there be a gain?

FAR - 71, 68, 74, (8/31/14) 78 ✔
REG - 67, 71, 71, (10/18/14) 78 ✔
BEC - (11/29/14) 86 ✔
AUD - 73, (4/4/15) 86 ✔

I can't believe this is over! 2 years and 3 months..

[Author]

Replies