Rx Corp wants to acquire all the stock of Vit B corp. Vit B is wholly owned by Honey, an individual shareholder who has owned the stock for 5 years. Honeys basis in Vit B is $75. Vit Bs assets are worth $200 and the adjusted basis of those assets is $40. If Rx gives Honey voting stock in Rx worth $250 in exchange for all the Vit B shares

1. How much gain or loss does Honey recognize on the transaction?

2. What is Honeys adjusted basis and holding period in the Rx shares she receives?

3. What is Rxs adjusted basis and holding period in the Vit B shares it receives?

4. What is Vit Bs basis in the Vit B assets which it continues to own?

5. Would Rx be able to make a section 338 election in connection with the acquisition?

Explain briefly why or why not.

6. Would the answer to question 1 change, and if so why and how, if Honey received $200 of coting stock of Rx and $30 of Rx bonds convertible into common stock?