Target Corporation Is Merging into Acquiring Corporation Under State Law

question 124

Multiple Choice

Target Corporation is merging into Acquiring Corporation under state law requirements.Target has 3,000 shares outstanding,with a value of $100 per share.Joey,one of Target's shareholders,exchanges his 500 Target shares,for which he paid $80 per share,for 1,000 shares of Crow stock,valued at $30 per share,and $5,000 cash.Acquiring owns 40% of Crow stock.How does Joey treat this transaction for tax purposes?

• A)Joey recognizes a $5,000 gain.
• B)Joey has a recognized $60,000 gain.
• C)Joey recognizes no gain or loss.
• D)Joey has a recognized loss of $5,000.
• E)None of the above.

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Definitions:

Quaternary

Relating to the most recent period of the geological time scale, which follows the Tertiary period and encompasses the current time.

Hemoglobin

A molecule found in red blood cells responsible for transporting oxygen from the lungs to the tissues throughout the body and bringing carbon dioxide from those tissues back to the lungs.

Metabolism

This is the set of life-sustaining chemical reactions in organisms, involving the conversion of food to energy, the elimination of nitrogenous wastes, and the synthesis of necessary compounds.

Triglycerides

A type of fat found in the blood, originating from foods or produced by the body, used for energy storage.