Saucer Corporation Has a Value of $800,000, Basis in Its

question 9

Multiple Choice

Saucer Corporation has a value of $800,000, basis in its assets of $670,000, and liabilities of $200,000. Cup Corporation acquires 90% of Saucer's assets by exchanging $550,000 of its voting stock, $20,000 cash, and assuming $150,000 of Saucer's liabilities. The remaining 10% of Saucer's assets not acquired is $80,000 cash. Saucer distributes the Cup stock, $100,000 in cash and associated $50,000 in liabilities to its shareholder, Sam, in exchange for his Saucer stock (basis $560,000) . Saucer then liquidates. How will this transaction be treated for tax purposes?

• A)As a "Type A" reorganization. Sam recognizes $50,000 of gain and Saucer recognizes $20,000 gain.
• B)As a "Type A" reorganization. Sam recognizes $100,000 gain and Saucer recognizes $120,000 gain.
• C)As a "Type C" reorganization. Sam recognizes $50,000 of gain and Saucer recognizes $20,000 gain.
• D)As a "Type C" reorganization. Sam recognizes $40,000 of gain and Saucer recognizes no gain.
• E)As a taxable transaction.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.