Saucer Corporation Has a Value of $800,000, Basis in Its

question 9

Multiple Choice

Saucer Corporation has a value of $800,000, basis in its assets of $670,000, and liabilities of $200,000. Cup Corporation acquires 90% of Saucer's assets by exchanging $550,000 of its voting stock, $20,000 cash, and assuming $150,000 of Saucer's liabilities. The remaining 10% of Saucer's assets not acquired is $80,000 cash. Saucer distributes the Cup stock, $100,000 in cash and associated $50,000 in liabilities to its shareholder, Sam, in exchange for his Saucer stock (basis $560,000) . Saucer then liquidates. How will this transaction be treated for tax purposes?

• A)As a "Type A" reorganization. Sam recognizes $50,000 of gain and Saucer recognizes $20,000 gain.
• B)As a "Type A" reorganization. Sam recognizes $100,000 gain and Saucer recognizes $120,000 gain.
• C)As a "Type C" reorganization. Sam recognizes $50,000 of gain and Saucer recognizes $20,000 gain.
• D)As a "Type C" reorganization. Sam recognizes $40,000 of gain and Saucer recognizes no gain.
• E)As a taxable transaction.

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Definitions:

Business Unionism

A labor union strategy focusing on the improvement of working conditions and wages, rather than pursuing broader social goals.

Comparative Labor Relations

The study of how labor relations systems, practices, and policies vary across countries and the cultural, economic, and legal factors that influence these differences.

Confederation

A union of sovereign groups or states, united for purposes of common action often in relation to other states but with each member retaining considerable independence.

Mexican Workers

Individuals employed in Mexico, often discussed in contexts concerning labor rights, working conditions, and migration.