Simone Transferred 100 Percent of Her Stock in Purple Company

question 10

Multiple Choice

Simone transferred 100 percent of her stock in Purple Company to Plum Corporation in a Type A merger. In exchange, she received stock in Plum with a fair market value of $500,000 plus $500,000 in cash. Simone's tax basis in the Purple stock was $200,000. What amount of gain does Simone recognize in the exchange and what is her basis in the Plum stock she receives?

• A)$800,000 gain recognized and a basis in Plum stock of $1,000,000
• B)$800,000 gain recognized and a basis in Plum stock of $500,000
• C)$500,000 gain recognized and a basis in Plum stock of $500,000
• D)$500,000 gain recognized and a basis in Plum stock of $200,000

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Definitions:

Unconstitutional Acts

Acts or laws that are found to violate a constitution, especially the U.S. Constitution, and are therefore invalid.

Congress

The national legislative body of a country, particularly referring in the United States to the bicameral legislature that constitutes the Senate and the House of Representatives.

Land Reform

The process of redistributing or regulating land ownership, often intended to increase agricultural production or to rectify inequities in land distribution.

Thaddeus Stevens

A nineteenth-century U.S. politician and fierce advocate for abolition and civil rights, particularly known for his role in shaping Reconstruction policies.