Grand Corporation Transfers 40% of Its Assets Having an Adjusted

question 48

Multiple Choice

Grand Corporation transfers 40% of its assets having an adjusted basis of $600,000 and an FMV of $800,000 to New Corporation in exchange for 75% of its single class of stock. Grand Corporation is owned equally by Annie and Betsy who are unrelated. Annie's basis for her Grand stock is $300,000 and Betsy's basis is $400,000. Annie exchanges all of her Grand stock for all of the New stock received in the exchange. Which of the following statements is correct concerning these transactions?

• A)Grand Corporation does not recognize a gain on the asset transfer to New Corporation or the stock distribution to Annie.
• B)Annie recognizes a $500,000 capital gain on the exchange of the Grand stock for the New stock.
• C)Annie's basis in the New stock is $300,000.
• D)Grand's basis for the New assets is $600,000.

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Definitions:

Fly Leg

Refers to the limb of a fly, which has been extensively studied in genetics and developmental biology to understand patterns of growth and the role of genes in morphogenesis.

Proximal Structures

Anatomical terms referring to structures closest to the trunk of the body or to the point of origin.

Hox Genes

A group of related genes that control the body plan of an embryo along the head-tail axis and have a significant role in determining the development and identity of body parts.

Vertebrate Wings

Specialized limbs in vertebrates such as birds, bats, and pterosaurs adapted for the purpose of flight.