Marty Is a Party to a Tax-Free Reorganization

question 13

Essay

Marty is a party to a tax-free reorganization. He has a basis of $22,000 in his Van Corporation stock that has an FMV of $35,000. Marty exchanges the Van stock for Young Corporation stock worth $29,000 and Young securities with a face amount of $7,000 and an FMV of $6,000. What is Marty's basis in the Young securities?

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Definitions:

Statement of Changes

Often refers to the statement of changes in equity or financial position, showing how equity values change over a period.

Statement of Income

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or net loss.

Equity

The value of ownership interest in the firm, calculated as total assets minus total liabilities.

Account Payable

Liabilities of a company that are owed to creditors or suppliers for purchases made on credit.