Silvia exchanges all her Theta Corporation stock (acquired August 1, 2011) for $300,000 of Alpha Corporation voting common stock pursuant to Theta’s merger into Alpha. Immediately after the stock-for-stock exchange Silvia owns 25% of Alpha’s 2,000 outstanding shares of stock. Silvia’s adjusted basis in the Theta stock is $200,000 before the merger.
a. What are the amount and character of Silvia’s recognized gain or loss?
b. What is Silvia’s basis in the Alpha stock? When does her holding period begin?
c. How would your answers to Parts a and b change if instead Silvia received $60,000 cash and Alpha common stock worth $240,000?