Mars Corporation Merges into Jupiter Corporation by Exchanging All of Its

question 2

Multiple Choice

Mars Corporation merges into Jupiter Corporation by exchanging all of its assets for 300,000 shares of Jupiter stock valued at $2 per share and $100,000 cash. Wanda, the sole shareholder of Mars, surrenders her Mars stock (basis $900,000) and receives all of the Jupiter stock transferred to Mars plus the $100,000. How does Wanda treat this transaction on her tax return?

• A) Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $900,000.
• B) Wanda recognizes a loss of $100,000. Her Jupiter stock basis is $800,000.
• C) Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.
• D) Wanda realizes a $200,000 loss of which $100,000 is recognized. Her Jupiter stock basis is $1 million.
• E) None of the above.

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Definitions:

Appalachian Mountains

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Mississippi River

One of the largest rivers in the United States, flowing southward for 2,340 miles from Minnesota to the Gulf of Mexico, serving as a vital waterway for agricultural and industrial transport.

Joseph Brant

The Mohawk leader who led the Iroquois against the Americans in the Revolutionary War.

Mohawk

A member of the Native American people originally from the Mohawk Valley in upstate New York.