Silver Corporation Redeems All of Alluvia's 3,000 Shares and Distributes

question 48

Multiple Choice

Silver Corporation redeems all of Alluvia's 3,000 shares and distributes to her 1,000 shares of Gold Corporation stock plus $20,000 cash.Alluvia's basis in her 30% interest in Silver is $80,000 and the stock's market value is $120,000.At the time Silver is acquired by Gold,the accumulated earnings and profits of Silver are $100,000 and Gold's are $50,000.How does Alluvia treat this transaction for tax purposes?

• A)No gain is recognized by Alluvia in this reorganization.
• B)Alluvia reports a $20,000 recognized dividend.
• C)Alluvia reports a $20,000 recognized capital gain.
• D)Alluvia reports a $15,000 recognized dividend and a $5,000 capital gain.
• E)None of the above.

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Definitions:

Eidetic Memory

The rare ability to recall images, sounds, or objects with high precision for a brief period after being exposed to them, often referred to as photographic memory.

Auditory Stimulation

The exposure to sound or noise, which can influence brain activity and behavior, being critical in processes like learning and communication.

Visual Stimuli

External cues or objects within the environment that are seen and can influence a person's behavior or emotional state.

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