David owns 600 shares of K Corporation stock when K is merged into Parent Corporation.David receives 500 shares of Parent Corporation stock (fair market value = $10,500)and $500 cash in exchange for his K Corporation stock.David's K stock had a basis of $8,000 and an $11,000 fair market value.What is David's realized and recognized gain,respectively?
A)$3,000 and $3,000
B) $3,000 and $2,500
C)$2,500 and zero
D)$2,500 and $500
E)$3,000 and $500

Question

Quizplus · Accepted Answer

David's realized gain is $3,000 ($11,000 fair market value of K stock - $8,000 basis). The recognized gain is the lesser of the realized gain or the cash received, which is $500.

David Owns 600 Shares of K Corporation Stock When K