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RCorp has assets worth $1,500 with an adjusted basis of $250, The company has common stock outstanding and bonds held by creditors. Ernie, a bondholder
RCorp has assets worth $1,500 with an adjusted basis of $250, The company has common stock outstanding and bonds held by creditors. Ernie, a bondholder exchanges $100,000 of 5% bonds in exchange for $100,000 of voting stock in RCorp. His basis in the bonds was $95,000 and he acquired the bonds 8 years ago.
1. How much if any gain or loss does Ernie from the previous transaction recognize when he exchanges his bonds for stock?
2. What is Ernie's adjusted basis in the stock he received?
3. What is Ernies holding period in the stock he receives?
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