2. Mars Corporation merges into Jupiter Corporation by exchanging all of its assets for 300,000 shares of Jupiter stock valued at $2 per share and $100,000 cash. Wanda, the sole shareholder of Mars, surrenders her Mars stock (basis $900,000) and receives all of the Jupiter stock transferred to Mars plus the $100,000. How does Wanda treat this transaction on her tax return?

a. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $900,000.

b. Wanda recognizes a loss of $100,000. Her Jupiter stock basis is $800,000.

c. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.

d. Wanda realizes a $200,000 loss of which $100,000 is recognized. Her Jupiter stock basis is $1 million.

e. None of the above.

3. Seven years ago, Eleanor transferred property she had used in her sole proprietorship to Blue Corporation for 2,000 shares of Blue Corporation in a transaction that qualified under 351. The assets had a tax basis to her of $500,000 and a fair market value of $700,000 on the date of the transfer. In the current year, Blue Corporation (E & P of $1 million) redeems 700 shares from Eleanor for $260,000 in a transaction that qualifies for sale or exchange treatment. With respect to the redemption, Eleanor will have a:

a. $140,000 dividend.

b. $260,000 dividend.

c. $140,000 capital gain.

d. $260,000 capital gain.

e. None of the above.

4. Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the current year. In addition, Elk has a $27,000 long-term capital gain and a $17,000 short-term capital loss. Elks taxable income is:

a. $63,000.

b. $83,000.

c. $80,000.

d. $90,000.

e. None of the above.