The Long Corporation Has $500,000 of Assets with a Basis

question 59

Multiple Choice

The Long Corporation has $500,000 of assets with a basis of $350,000 and liabilities of $125,000. ShortCo acquires Long's assets and $100,000 of liabilities by exchanging $400,000 of its voting stock. Long distributes the ShortCo stock and remaining liabilities to its shareholder in exchange for her Long stock with a basis of $275,000 and then it liquidates. Which, if any, of the following statements is correct?

• A)This restructuring qualifies as a "Type A" reorganization with no recognized gains or losses.
• B)This restructuring qualifies as a "Type C" reorganization with no recognized gains or losses.
• C)This qualifies as either a "Type A" or "Type C" and the shareholder has a $25,000 recognized gain.
• D)The restructuring is taxable because liabilities cannot be distributed to shareholders in a tax-free reorganization.
• E)None of the above statements is correct.

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Definitions:

Primary Emotion

A fundamental feeling that arises spontaneously as a direct response to a situation, such as joy, fear, anger, or sadness.

Anger

A strong feeling of annoyance, displeasure, or hostility triggered by perceived wrong or injustice.

Hocker And Wilmot

Refers to Joyce Hocker and William Wilmot, scholars who have contributed significantly to the study of conflict resolution and interpersonal communication.

Avoidant Family

A family system characterized by a reluctance to confront or engage in emotional connections, often avoiding conflicts or emotional expressions.