Racket Corporation and Laocoon Corporation Create Raccoon Corporation

question 37

Multiple Choice

Racket Corporation and Laocoon Corporation create Raccoon Corporation. Racket transfers $600,000 in assets for all of Raccoon's common stock. Racket distributes its remaining assets ($300,000) and the Raccoon common stock to its shareholder, Mia, for all of her stock in Racket (basis $950,000) and then liquidates. Laocoon receives all of the preferred stock for its $400,000 of assets. Laocoon distributes its remaining assets ($300,000) and the Raccoon preferred stock to its shareholder, Carlos, for all of his stock in Laocoon (basis $200,000) and then liquidates. How will this transaction be treated for tax purposes?

• A)This qualifies as a "Type A" reorganization. Mia recognizes no gain or loss, but Carlos recognizes $300,000 gain.
• B)This qualifies as a "Type C" reorganization. Mia and Carlos recognize $300,000 gain, to the extent of the boot.
• C)This qualifies as a "Type D" reorganization. Neither Mia nor Carlos recognizes a gain or loss.
• D)This is a taxable transaction. Mia recognizes $50,000 loss and Carlos recognizes $500,000 gain.
• E)None of the above.

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Definitions:

Torture-Based

Derived from or involving the use of severe physical or psychological pain as a means to punish, coerce, or obtain information.

Questioning

The process of exploring one's own sexual orientation or gender identity, considering how they might label themselves.

Managed Care Programs

Health care delivery systems that integrate the financing and delivery of health care services to subscribers, with an emphasis on controlling costs and improving quality.

Short-Term Care

Medical or psychological care provided for a brief period to treat acute conditions or to facilitate recovery from surgery, illness, or injury.