Grant Corporation Transfers Highly Appreciated Stock to Subsidiary Corporation in Exchange

question 16

Multiple Choice

Grant Corporation transfers highly appreciated stock to Subsidiary Corporation in exchange for all of its stock. The Subsidiary Corporation stock is distributed to its sole shareholder, Peter. Three weeks after the distribution of the Subsidiary stock, Subsidiary Corporation liquidates. Peter then sells the appreciated stock that he received in the liquidation. This series of transactions

• A)does not meet the statutory definition of a divisive Type D reorganization.
• B)fails the business purpose requirement.
• C)results in a capital gain to Peter.
• D)None of the above is correct.

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Definitions:

Marginal Cost

The expense associated with manufacturing an extra unit of a product.

Marginal Benefits

The extra advantages or utilitarian value derived from consuming an additional unit of a product or service, highlighting consumer preferences.

Net Benefit

The total positive effects of a decision or action minus the total costs associated with it.

Crime-Control Program

Initiatives or strategies implemented to reduce the incidence of crime and increase public safety.