Brighton Corporation Requires All of Its Shareholders to Relinquish a Proportionate

question 126

Multiple Choice

Brighton Corporation requires all of its shareholders to relinquish a proportionate number of their common shares,and in return they receive preferred stock.For each 10 shares of common stock,the shareholders receive 1 share of preferred.After the transaction is complete,60% of the shareholders sell their preferred stock to the remaining 40% preferred owners.Which of the following statements is correct?

• A)The exchange of common for preferred is not be taxable.
• B)The shareholders will recognize gain or loss when they sell their preferred stock to the other shareholders.
• C)This qualifies as a "Type E" reorganization.
• D)All of the above are correct.
• E)None of the above is correct.

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