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Michael has 100,000 shares outstanding that are worth $10 per share. It uses 32% of its stock, plus $80,000 to acquire Nickel Corporation in a

Michael has 100,000 shares outstanding that are worth $10 per share. It uses 32% of its stock, plus $80,000 to acquire Nickel Corporation in a Type A reorganization. Nickel's assets are valued at $400,000, and its accumulated earnings and profits are $25,000 at the time of the reorganization. The Michael Corp. shares and cash are distributed to the Nickel shareholders as follows. Joe (owning 62.5% of Nickel) receives 18,000 shares (value $180,000) and $70,000. Diane (owning 37.5% of Nickel) receives 14,000 shares (value $140,000) and $10,000. Joe and Diane each recognize gains to the extent of the cash they received. What is the character of Joe and Diane's gains?

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