Question
Sam and Veronica own 300 and 200 shares, respectively, of Poly-Electron Corporation stock, which represent all the shares outstanding. The current market value per share
Sam and Veronica own 300 and 200 shares, respectively, of Poly-Electron Corporation stock, which represent all the shares outstanding. The current market value per share is $25. Poly-Electron needs capital to expand its operations, and Veronica is willing to contribute to Poly-Electron silver bullion against which the corporation can borrow operating funds. Veronica purchased the bullion 12 years ago, when its cost was a fraction of its current market value.
If Veronica wants to avoid recognizing a gain upon transferring the bullion to the corporation, how many additional shares must she receive in exchange for the bullion, and what value of silver bullion should she contribute to Poly-Electron in exchange for additional shares? Hint: Veronica needs to achieve 80% control of the corporation.
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