Mr Ricardo Exchanged 75 Shares of Haslet Common Stock for 516

question 70

Multiple Choice

Mr. Ricardo exchanged 75 shares of Haslet common stock for 516 shares of Newland common stock pursuant to a reorganization of the two corporations. His basis in the Haslet stock was $49,200, and the fair market value of the Newland stock was $138,000. Which of the following statements about the exchange is true?

• A) Mr. Ricardo recognizes no gain and takes a $138,000 basis in the Newland stock.
• B) Mr. Ricardo recognizes an $88,800 gain and takes a $138,000 basis in the Newland stock.
• C) Mr. Ricardo recognizes no gain and takes a zero basis in the Newland stock.
• D) Mr. Ricardo recognizes no gain and takes a $49,200 basis in the Newland stock.

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Definitions:

Flooding

A behavioral fear-reduction technique based on principles of classical conditioning; fear-evoking stimuli (CSs) are presented continuously in the absence of actual harm so that fear responses (CRs) are extinguished.

Unconditioned Stimulus (UCS)

A stimulus that elicits a response from an organism prior to conditioning.

Pavlov

A Russian physiologist known for his work in classical conditioning, particularly his experiments with dogs and salivation.

Meat Powder

A substance used in Pavlov's experiments that, when presented to dogs, would cause them to salivate, demonstrating classical conditioning.