In a Valid "C" Reorganization, Target Transfers Assets with a Basis

question 59

Multiple Choice

In a valid "C" reorganization, Target transfers assets with a basis of $1 million and a fair market value of $1.5 million and receives stock with a fair market value of $1.3 million and $200,000 boot.Target has no remaining assets.Target liquidates by transferring the stock and boot to its shareholders.The amount of gain Target must recognize is

• A)$0
• B)$200,000
• C)$500,000
• D)None of the above

---

Definitions:

Impaired

A term indicating that an asset's market value has decreased significantly more than what is recorded on financial statements, suggesting that the asset may not be recoverable to its currently stated value.

Recoverable Amount

The higher value between an asset's fair value minus costs to sell and its value in use, used in assessing whether an asset is impaired.

Carrying Amount

The book value of an asset or liability on a company's balance sheet, reflecting its original cost adjusted for factors such as depreciation or amortization.

Anticipated Residual

The estimated value of an asset at the end of its useful life, taking into account depreciation and wear.