Kelly owns all the stock in Duncan Corp.

Her Duncan stock has a basis of $120,000

and a fair market value of $150,000.

Duncan Corp. is merged into Munro Corp.

Pursuant to the reorganization, Kelly receives

Munro preferred stock worth $50,000 and

Munro common stock worth $100,000 in

exchange for her Duncan Corp. stock.

a.

What is the amount and character of

Kellys realized and recognized gain?

b.

What is Kellys tax basis for her Munro

Corp. preferred stock and common stock?