Reorganizations

T co. was merged into P co. pursuant to a statutory merger.

Joe, a T co. shareholder, exchanged his T co. stock ($65,000 FMV, $20,000 basis) for $40,000 P co. stock, $20,000 cash, and a P co. security (principal amount and FMV $5,000).

Pursuant to the merger, T co. transferred to P co. its sole asset ($400,000 FMV, $200,000 basis) and liabilities ($300,000).

Assume all judicial doctrines have been satisfied.

1) Joe's realized and recognized gain, respectively, is?

None of these.

$45,000 and $25,000.

$40,000 and 0.

$45,000 and $20,000.

2) Joe's basis in the P co. stock and P co. security, respectively, is?

None of these.

$45,000 and $5,000.

$20,000 and $5,000.

$40,000 and $5,000.

3) P co.s recognized gain and basis in the assets received from T co., respectively, is?

0 and $200,000.

None of these.

$60,000 and $260,000.

0 and $300,000.

4) T co.'s recognized gain is

$25,000, due to the cash and bonds received.

$100,000, due to the assumed liabilities.

0.

None of these.

5) If Joe had also surrendered T co. securities in the exchange, with a principal amount and FMV of $3,000, and Joe's basis in the securities was $1,000, what would Joe's recognized gain be?

0

$22,000

None of these.

$25,000

$24,000