Assume that in the first step of the reorganization, Auto Corp. will exchange $6,071,963 worth of Auto Corp. stock plus land with a fair market value of $2,276,714 for all of Battery Corp.'s assets. Auto Corp's land had a basis of $5,761 prior to the exchange. Battery Corp.'s assets had a basis of $1,296,616 prior to the exchange. Assume that in the second step of the reorganization, Battery Corp. will distribute the $6,071,963 in Auto Corp. stock plus the land that it just acquired from Auto Corp. to Battery Corp's sole shareholder, Sydney, in exchange for all of Sydney's shares of Battery Corp. stock. Prior to the exchange, Sydney's basis in her shares of Battery Corp. stock was $3,863,473. After the exchange, Sydney will now be a shareholder of Auto Corp. instead of Battery Corp. What amount of gain/loss will Battery Corp. recognize as a result of the reorganization?
Assume that in the first step of the reorganization, Auto Corp. will exchange $6,071,963 worth of Auto Corp. stock plus land with a fair market value of $2,276,714 for all of Battery Corp.'s assets. Auto Corp's land had a basis of $5,761 prior to the exchange. Battery Corp.'s assets had a basis of $1,296,616 prior to the exchange. Assume that in the second step of the reorganization, Battery Corp. will distribute the $6,071,963 in Auto Corp. stock plus the land that it just acquired from Auto Corp. to Battery Corp's sole shareholder, Sydney, in exchange for all of Sydney's shares of Battery Corp. stock. Prior to the exchange, Sydney's basis in her shares of Battery Corp. stock was $3,863,473. After the exchange, Sydney will now be a shareholder of Auto Corp. instead of Battery Corp. What amount of gain/loss will Battery Corp. recognize as a result of the reorganization?
Chapter7: Corporations: Reorganizations
Section: Chapter Questions
Problem 43P
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Question
![Assume that in the first step of the reorganization,
Auto Corp. will exchange $6,071,963 worth of Auto
Corp. stock plus land with a fair market value of
$2,276,714 for all of Battery Corp.'s assets. Auto
Corp's land had a basis of $5,761 prior to the
exchange. Battery Corp.'s assets had a basis of
$1,296,616 prior to the exchange.
Assume that in the second step of the reorganization,
Battery Corp. will distribute the $6,071,963 in Auto
Corp. stock plus the land that it just acquired from
Auto Corp. to Battery Corp.'s sole shareholder,
Sydney, in exchange for all of Sydney's shares of
Battery Corp. stock. Prior to the exchange, Sydney's
basis in her shares of Battery Corp. stock was
$3,863,473. After the exchange, Sydney will now be
a shareholder of Auto Corp. instead of Battery Corp.
What amount of gain/loss will Battery Corp.
recognize as a result of the reorganization?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2c67b84c-531a-4079-bc7d-aecc5b39efc6%2F5d4d2aff-7e94-4f08-a85c-b3db09ffd944%2Fv30vfj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Assume that in the first step of the reorganization,
Auto Corp. will exchange $6,071,963 worth of Auto
Corp. stock plus land with a fair market value of
$2,276,714 for all of Battery Corp.'s assets. Auto
Corp's land had a basis of $5,761 prior to the
exchange. Battery Corp.'s assets had a basis of
$1,296,616 prior to the exchange.
Assume that in the second step of the reorganization,
Battery Corp. will distribute the $6,071,963 in Auto
Corp. stock plus the land that it just acquired from
Auto Corp. to Battery Corp.'s sole shareholder,
Sydney, in exchange for all of Sydney's shares of
Battery Corp. stock. Prior to the exchange, Sydney's
basis in her shares of Battery Corp. stock was
$3,863,473. After the exchange, Sydney will now be
a shareholder of Auto Corp. instead of Battery Corp.
What amount of gain/loss will Battery Corp.
recognize as a result of the reorganization?
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