Mr Ricardo Exchanged 75 Shares of Haslet Common Stock for 516

question 70

Multiple Choice

Mr. Ricardo exchanged 75 shares of Haslet common stock for 516 shares of Newland common stock pursuant to a reorganization of the two corporations. His basis in the Haslet stock was $49,200, and the fair market value of the Newland stock was $138,000. Which of the following statements about the exchange is true?

• A) Mr. Ricardo recognizes no gain and takes a $138,000 basis in the Newland stock.
• B) Mr. Ricardo recognizes an $88,800 gain and takes a $138,000 basis in the Newland stock.
• C) Mr. Ricardo recognizes no gain and takes a zero basis in the Newland stock.
• D) Mr. Ricardo recognizes no gain and takes a $49,200 basis in the Newland stock.

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Definitions:

Partnership Liabilities

Obligations and debts that are shared by partners in a partnership arrangement.

Income Ratio

A financial metric that compares a company’s income to another measure, such as sales or assets, to assess financial performance.

Cash Distribution

The process of paying out earnings to stakeholders, often in the form of dividends to shareholders or distributions to partners.

Liquidation Balances

The final amounts owed to creditors and investors after a company has been liquidated and all assets have been sold off.