ScottishCo Is Owned by Gordon Bryson and His Four Nieces

question 85

Multiple Choice

ScottishCo is owned by Gordon Bryson and his four nieces and nephews.Gordon owns all the voting stock.He wants to relinquish control;accordingly,ScottishCo redeems all of Gordon's voting common stock and issues him preferred stock and $50,000 in bonds.The nonvoting preferred shares owned by the nieces and nephew are exchanged for voting common stock.Which of the following statements is correct?

• A)None of this transaction is taxable because it qualifies as a "Type E" reorganization.
• B)The exchange of common for preferred is not taxable but the exchange of preferred stock for common stock is taxable.
• C)The exchange of common stock for a bond is taxable.
• D)All of these transactions are taxable.
• E)None of the above statements is correct.

---

Definitions:

Context

The circumstances or background that surrounds and gives meaning to an event, statement, or idea.

Facial Feedback Hypothesis

The idea that sensory feedback from our facial expressions can affect our mood and emotions, influencing how we feel.

Brain Activation

The process of increasing blood flow to different parts of the brain during various cognitive tasks, reflecting an increase in energy use by those brain regions.

Basic Emotion

Fundamental emotions that are universally experienced by humans, such as happiness, sadness, fear, disgust, anger, and surprise.