In other words, $355,000.
Pursuant to a reorganization plan
adopted this year that meets all required general principles,
Sunchaser Shakery Corporation exchanged property with a basis of $50,000 for
50,000 shares of Marley Corporation (worth $520,000 at that time).
Sunchaser was liquidated shortly thereafter,
with its sole shareholder, Nicholas,
receiving the Marley shares.
Nicholas had a $130,000 basis in his Sunchaser shares.
What are the tax effects of the reorganization?
As this is an asset for stock exchange,
in other words, a Type C reorganization,
there is no gain or loss to
recognize unless there's any boot received.
And here, he received nothing but stock in Marley.
Thus, there is no gain or loss recognition.
As before and as in most cases where is a non-taxable transaction,
the basis that he will receive is the carry over or exchange basis.
In other words, $130,000.
Sunchaser Shakery Corporation, which is owned equally by four individuals,
owns all of the stock of Sea Breeze,
Inc. Sea Breeze was acquired six years ago and is now worth $100,000 a basis of $30,000.
Sunchaser distributes the Sea Breeze stock
equally to the four shareholders as part of a spin-off.
What amount and type of income do the shareholders a Sunchaser recognize if
E&P was $300,000 at the time of the distribution?
So assuming all spin-off requirements are met,
there is no gain or loss recognition as this is a Type D reorganization.
As part of a recapitalization of Sunchaser Shakery Corporation,
Nicholas exchanged 100 shares of his stock with a basis of
$58,000 for 100 shares of a new class of stock worth $208,000.
What amount of gain or loss (if any) does Nicholas recognize?
So recall, that recapitalizations are Type E reorganisations.
Thus, no gain or loss is recognize.
If stock for stock exchange occurs pursuant to a reorganization plan.
In this case, there is no exchange with another corporate entity,
thus, there is no gain or loss recognized.