A shareholder bought 10,000 shares of Coral Corporation for $50,000 several years ago. When the stock is valued at $90,000, Coral redeems the shares in exchange for 5,000 shares of Blush Corporation stock and a $10,000 Blush bond. This transaction meets the requirements of § 368. Which of the following statements is false regarding this transaction?

Question

Quizplus · Accepted Answer

The shareholder's basis in the Blush stock is the original basis of the Coral stock ($50,000) minus the recognized gain ($10,000), resulting in a basis of $40,000, not $60,000.

A Shareholder Bought 10,000 Shares of Coral Corporation for $50,000