Question

Jasmine transferred 100 percent of her stock in Emerald Company to Jade Corporation in a Type A merger. In exchange she received stock in Jade with a fair market value of $900,000 plus $1,220,000 in cash. Jasmine's tax basis in the Emerald stock was $1,007,000. What amount of gain does Jasmine recognize in the exchange and what is her basis in the Jade stock she receives?

Answer 1

What amount of gain does Jasmine recognize in the exchange Solution =  Gain recognised = 1,113,000 Working Particulars Amount Consideration received ($900,000 + $1,220,000) $2,120,000 Less: Tax basis ($1,007,000) Total 1,113,000 Gain recognised will be the lower of 1,113,000 OR $1,220,000(Cash received) Gain recognised = 1,113,000

What is her basis in the Jade stock she receives? Solution = $900,000 Working: = $1,007,000 + 1,113,000 ( Gain recognised) - $1,220,000 (Cash received) = $900,000

Please upvote. Thanks