Cat Corporation Is Acquiring Bird Corporation by Exchanging 100,000 Shares

question 90

Essay

Cat Corporation is acquiring Bird Corporation by exchanging 100,000 shares of Cat stock and $80,000 cash for all of Bird's assets (valued at $500,000),liabilities ($200,000),and accumulated earnings and profits ($120,000).Betty purchased 40% of Bird five years ago for $60,000 and Keith purchased the remaining 60% for $90,000.What is the amount and character of the gain or loss Betty and Keith recognize,assuming that the reorganization qualifies as a "Type A" reorganization? What is the basis in their new Cat Corporation stock?

---

Definitions:

Traumatic Brain Injury

Brain dysfunction caused by an outside force, typically a violent blow to the head, leading to temporary or long-term impairment of cognitive, physical, and emotional functions.

Posttraumatic Stress Disorder

A mental health condition triggered by experiencing or witnessing a traumatic event, characterized by flashbacks, nightmares, and severe anxiety.

Schizophrenia

A mental disorder characterized by disturbances in thought, perception, and behavior, leading to a disconnect from reality.

Passive Aggression

A behavior pattern characterized by indirect expression of hostility through acts such as procrastination, stubbornness, and intentional inefficiency.