Mars Corporation Merges into Jupiter Corporation by Exchanging All of Its

question 47

Multiple Choice

Mars Corporation merges into Jupiter Corporation by exchanging all of its assets for 300,000 shares of Jupiter stock valued at $2 per share and $100,000 cash. Wanda, the sole shareholder of Mars, surrenders her Mars stock (basis $900,000) and receives all of the Jupiter stock transferred to Mars plus the $100,000. How does Wanda treat this transaction on her tax return?

• A) Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $900,000.
• B) Wanda recognizes a loss of $100,000. Her Jupiter stock basis is $800,000.
• C) Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.
• D) Wanda realizes a $200,000 loss of which $100,000 is recognized. Her Jupiter stock basis is $1 million.
• E) None of these.

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Definitions:

Severed

Cut off or separated, often used in context to describe a physical disconnection of part of the body or a division within relationships or connections.

Split Brain

Describes a condition resulting from the severance or lesion of the corpus callosum, leading to a disconnection between the two hemispheres of the brain.

Acetylcholine

A neurotransmitter in the nervous system that plays an important role in muscle contraction and cognitive functions.

Agonist

is a substance that binds to a receptor and triggers a response in the body, often mimicking the action of a naturally occurring substance.