Carlos Purchased 20% of Target Corporation's Stock Five Years Ago

question 64

Multiple Choice

Carlos purchased 20% of Target Corporation's stock five years ago for $50,000.In a transaction qualifying as a "Type A" reorganization,Carlos received $40,000 cash and 6% of Acquiring Corporation's stock (valued at $60,000) in exchange for his Target stock.Target had $300,000 accumulated earnings and profits prior to the reorganization.How does Carlos treat the exchange for tax purposes?

• A)As a sale of stock and recognizes a $50,000 long-term capital gain.
• B)As a sale of stock and recognizes a $10,000 long-term capital loss.
• C)As a dividend of $40,000.
• D)As a stock redemption and recognizes a $40,000 long-term capital gain.
• E)Not enough information is available to determine proper treatment.

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Definitions:

Organisational Designs

The process of shaping an organization’s structure, roles, and networks to effectively manage and coordinate activities towards achieving its objectives.

Flexibility

The ability to adapt to changing circumstances, adjust to new instructions or conditions, and remain effective in a variety of situations.

Customers

Individuals or entities that purchase goods or services produced by a business.

Consumer Groups

Organizations or collectives that advocate for the rights and interests of consumers, often focusing on issues like product safety, quality, and fair pricing.