Tony, a U.S. citizen, owns 100% of the stock of FORco, a foreign corporation. In a Type B reorganization, Tony exchanges all his shares of FORco for shares of a domestic corporation, USAcquiror. What are the tax implications of this transaction to Tony?

1The transaction is tax-free to Tony.

2Tony must report any gain on the exchange.

3Tony must include a dividend to the extent of the earnings and profits of FORco.

4None of the above.