Dahlia Owns $100,000 in Fuchsia Bonds

question 25

Multiple Choice

Dahlia owns $100,000 in Fuchsia bonds.The interest rate on the bonds is a 4% yearly rate.She exchanges these bonds for $60,000 in Fuchsia bonds paying a 6% yearly rate and $40,000 in Fuchsia preferred stock with a 4% dividend.How is this transaction treated for tax purposes?

• A)All of this transaction is taxable.
• B)Only the exchange of the bond for the preferred stock is a taxable transaction.
• C)Only the exchange of the 4% bond for a 6% is taxable because the interest rate increased.
• D)None of the transaction is taxable because it qualifies as a "Type E" reorganization.
• E)None of the above.

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Definitions:

Human Relations Movement

An approach to management focusing on the social factors at work and the behavior of employees within organizations.

Mary Parker Follett

An American social worker, management consultant, and pioneer in the field of organizational theory and behavior.

Human Relations

The study of how people interact in personal and professional settings and the strategies to improve these interactions.

Honest

The quality of being truthful and free from deceit.