Julian Transferred 100 Percent of His Stock in Lemon Company

question 110

Multiple Choice

Julian transferred 100 percent of his stock in Lemon Company to Apricot Corporation in a Type B stock-for-stock exchange. In exchange, he received stock in Apricot with a fair market value of $200,000. Julian's tax basis in the Lemon stock was $400,000. What amount of loss does Julian recognize in the exchange and what is his basis in the Apricot stock he receives?

• A)$200,000 loss recognized and a basis in Apricot stock of $200,000
• B)No loss recognized and a basis in Apricot stock of $400,000
• C)$200,000 loss recognized and a basis in Apricot stock of $400,000
• D)No loss recognized and a basis in Apricot stock of $200,000

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Definitions:

Congress

The national legislative body of a country, particularly in the United States, consisting of two houses: the Senate and the House of Representatives.

Federal Funds Rate

The interest rate at which depository institutions lend reserve balances to other depository institutions overnight, on an uncollateralized basis.

Short-Term Loans

Loans that are scheduled to be repaid in less than a year.

Reserves

Funds or commodities set aside for future use or to meet unforeseen contingencies, often related to banks or natural resources.