Rocky Is a Party to a Tax-Free Asset-For-Stock Reorganization

question 62

Multiple Choice

Rocky is a party to a tax-free asset-for-stock reorganization. As part of the transaction, Rocky exchanges 100% of the Hope Corporation stock with a $40,000 basis and a $50,000 FMV for Moth Corporation stock worth $40,000 and $10,000 cash. Hope Corporation is subsequently liquidated as part of the reorganization, with Moth receiving the Hope assets and liabilities. Rocky is

• A)not required to recognize any gain or loss.
• B)required to recognize capital gain or dividend income of $10,000, depending on Hope Corporation's current and accumulated E&P and Rocky's postacquisition interest in Moth Corporation.
• C)required to recognize dividend income of $10,000 if Hope Corporation's current and accumulated E&P is at least $10,000.
• D)able to recognize capital gain income of $10,000 without regard to his post-acquisition interest in Moth Corporation.

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Definitions:

Problem Framing

The way a problem is perceived or structured, heavily influencing the solutions considered.

Unfavorable Situations

Circumstances or conditions that are disadvantageous, challenging, or pose obstacles to achieving goals.

Knowledge Management

The process of creating, sharing, using, and managing the knowledge and information of an organization to fulfill its objectives.

Organizational Innovation

The process of implementing new ideas, creating dynamic products, or improving existing services within an organization.