Question

Pursuant to plan of reorganization adopted in the curren year, newman corporation exchanged property with an adjusted basis of 80,000 for 5,000 shares of jabot corporation stock. The Jabot shares had a fair market value of 95,000 on the date of the exchange. Newman Corporation was liquidated shortly after the exchange with its sole shareholder. Victor, receiving the jabot shares. Victor had a dollar 90,000 basis in the Newman shares surrendered.

1. As a result of the exchange, what are Victor's recognized gain and his basis in the jabot stock?

Answer 1

Step-by-step explanation:

Victor's recognized gain equals to zero, because this exchange qualifies under Sec. 368 as a tax-free reorganization.