Hosha exchanges all of her Leaf stock for Petal stock plus $22,800 cash. The exc

Question

Hosha exchanges all of her Leaf stock for Petal stock plus $22,800 cash. The exchange is pursuant to a tax-free reorganization. Hosha paid $114,000 for the Leaf stock five years ago. The Petal stock received by Hosha has an $79,800 fair market value.

If an amount is zero, enter "0".

a. What is Hosha’s realized and recognized gain/loss from the reorganization?
Hosha has a $____________ realized___________(Gain/loss) of which $________________ is recognized.

b. What is Hosha’s basis in the Petal stock she received?
Her basis in the Petal stock is $____________.

Explanation / Answer

Total amount received for the petal stock by Hosha = $ 79800 (fmv) + $ 22800 = $ 102600 Adjusted basis in the stock by Hosha = $ 114000 Realized loss = $ 79800 - $ 114000 = 34200 Recognized loss =  $ 102600 - $ 114000 = $ 11400 Her basis in the petal stock is $ 102600

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