J owns all the stock of T. T\'s only assets is a thoroughbred racing track with
ID: 2452825 • Letter: J
Question
J owns all the stock of T. T's only assets is a thoroughbred racing track with an adjusted basis of $1,200,000 and a fair market value of $3,000,000. J's basis in the T stock is $1,000,000. P, a corporate developer of shopping malls wants to acquire teh race track for a mall site. P and J agree on a Type C reorganization, with T trading the race track for P stock worth $2,580,000 and $20,000 in cash and then liquidating. P will give T some treasure share P bought in the market for $2,000,000. Assume this will qualify as a good Type C reorganization to which T and P are "parties to a reorganization."
a Upon T's distribution of the P stock and cash to J, T recognizes no gain under Section 336(c) and Section 361(c)
b Upon the distribution of the P stock and cash, T has recognized gain of $20,000 on the distribution of the boot.
c Upon the distribution of the P stock and cash, T has gain of $2,580,000 less $1,200,000 less $20,000.
d None of the above
Explanation / Answer
Solution:
T's Assets Adjusted Basis 12,00,000
Fair Market Value 30,00,000
J's Basis T's Stock 10,00,000
P a Corporate Developer of Shipping
P and J agree C reorgangation with
Trading a rate
P's Worth is 25,80,000
And 20,000
Distribution of the P's Stock and Cash, T has gain of $2,580,000 less $1,200,000 less $20,000
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