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

1. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $900,000.
2. Wanda realizes a $200,000 loss, none of which is recognized. Her Jupiter stock basis is $800,000.
3. Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.
4. Wanda realizes a $200,000 loss, of which $100,000 is recognized. Her Jupiter stock basis is $700,000.

1. Whydah Co. is owned by Gilda and her four nieces and nephews. Gilda owns all of the Whydah Co. voting stock and its $50,000 bond. She wants to relinquish control of the entity. Accordingly, Whydah Co. redeems all of Gildas voting common stock and issues her its preferred stock. She also exchanges her bond for preferred stock. The nonvoting preferred shares owned by the nieces and nephews are exchanged for voting common stock. Which of the following statements is correct?

1. The exchange of a bond for preferred stock is taxable.
2. The exchange of common for preferred is not taxable, but the exchange of preferred stock for common stock is taxable.
3. All these transactions are taxable.
4. This transaction is not currently taxable; this is a Type E reorganization.

1. During the current year, Everbrite Corporation is liquidated and distributed its only asset, land, to Mackenzie, the sole shareholder. On the date of distribution, the land has a basis of $250,000, a fair market value of $650,000, and is subject to a liability of $500,000. Mackenzie, who takes the land subject to the liability, has a basis of $120,000 in the Everbrite stock. With respect to the distribution of the land, which of the following statements is correct?

1. Mackenzie recognizes a gain of $530,000.
2. Everbrite Corporation recognizes a gain of $250,000.
3. Mackenzie recognizes a gain of $30,000.
4. Mackenzie has a basis of $250,000 in the land.

1. Target Corporation transfers assets with a fair market value of $300,000 (basis of $200,000) to Acquiring Corporation for voting stock in Acquiring worth $220,000, cash of $60,000, and the assumption by Acquiring of liabilities of Target in the amount of $20,000. Target then distributes the Acquiring stock and the cash to its shareholders in exchange for all their stock in Target Corporation and liquidates. This transaction qualifies as a Type C reorganization.

1. True.
2. False.