Mars Corporation Merges into Jupiter Corporation by Exchanging All of Its

question 2

Multiple Choice

Mars Corporation merges into Jupiter Corporation by exchanging all of its assets for 300,000 shares of Jupiter stock valued at $2 per share and $100,000 cash. Wanda, the sole shareholder of Mars, surrenders her Mars stock (basis $900,000) and receives all of the Jupiter stock transferred to Mars plus the $100,000. How does Wanda treat this transaction on her tax return?

• A) Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $900,000.
• B) Wanda recognizes a loss of $100,000. Her Jupiter stock basis is $800,000.
• C) Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.
• D) Wanda realizes a $200,000 loss of which $100,000 is recognized. Her Jupiter stock basis is $1 million.
• E) None of the above.

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Definitions:

Fast-food Restaurant

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The reuse or repurposing of products or materials in ways other than their intended use, often to extend their lifecycle or reduce waste.

Underground Economy

Economic activities not reported to the government and outside of governmental regulation, typically to avoid taxes or because the activity is illegal.

Freecycling

The practice of giving away unwanted items for free rather than disposing of them, to promote reuse and reduce waste.