Target Corporation Is Merging into Acquiring Corporation Under State Law

question 124

Multiple Choice

Target Corporation is merging into Acquiring Corporation under state law requirements.Target has 3,000 shares outstanding,with a value of $100 per share.Joey,one of Target's shareholders,exchanges his 500 Target shares,for which he paid $80 per share,for 1,000 shares of Crow stock,valued at $30 per share,and $5,000 cash.Acquiring owns 40% of Crow stock.How does Joey treat this transaction for tax purposes?

• A)Joey recognizes a $5,000 gain.
• B)Joey has a recognized $60,000 gain.
• C)Joey recognizes no gain or loss.
• D)Joey has a recognized loss of $5,000.
• E)None of the above.

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Definitions:

First Degree

In the context of burns, refers to the least severe type affecting only the outer layer of skin, causing redness and pain.

Self-actualization

A concept in psychological theory most often associated with Abraham Maslow, describing the realization of a person's potential, self-fulfillment, seeking personal growth and peak experiences.

Authentic

Being true to one's own personality, spirit, or character despite external pressures.

Empathize

The act of understanding and sharing the feelings of another person.