Abby and Bera each owns 50% of Lakeview Co, a Pennsylvania corporation. Abby's basis in the stock is $80; Bera's basis in the stock is $50. The stock of Lakeview Co is worth $200. Chris, the sole shareholder of Mountainview Co is interested in acquiring Lakeview Co.

1. Abby and Bera formed a new corporation, New Co, in Delaware, which is equally owned by Abby and Bera. Thereafter, Abby and Bera caused Lakeview Co to be merged into New Co, with New Co surviving. Please analyze how this transaction is characterized.

2. After the transaction above, Mountainview Co purchased the stock in New Co with $100 cash and $100 worth of Mountainview Co stock, which was equally received by Abby and Bera. Please analyze how the purchase affects the tax treatment in Question 1