Acme Corporation Acquires Fisher Corporation's Assets in a Type a Reorganization

question 24

Essay

Acme Corporation acquires Fisher Corporation's assets in a Type A reorganization for $800,000 of Acme's nonvoting preferred stock and $200,000 (face amount and FMV)of securities. The assets have an adjusted basis of $600,000 and an FMV of $1,500,000. In addition, Acme Corporation assumes $500,000 of Fisher's liabilities. At the time of the transfer, Acme's E&P is $400,000. Fisher distributes the stock and securities to its sole shareholder Barbara for all of her Fisher stock. After the reorganization, Barbara owns 25% of Acme's stock. Barbara has an adjusted basis of $400,000 in her Fisher stock. What is Barbara's basis for her Acme stock?

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Definitions:

Entrepreneurs

Individuals who take on the risk of starting and managing a business, often bringing innovation and new products or services to the market.

Economical

Pertains to the efficient use or management of resources to avoid waste and reduce expenses.

Alternative Energy

Sources of energy that are considered environmentally friendly and sustainable, alternative to conventional fossil fuels, such as solar, wind, and hydroelectric power.

Elasticity of Demand

Investigating the degree to which demand for a good is affected by its price dynamics.