Mrs. Lindt exchanged 212 shares of Nipher common stock for 773 shares of Newland common stock. Her basis in the Nipher stock was $49,200, and the fair market value of the Newland stock was $138,000. Which of the following statements about the exchange is true?

Question

Quizplus · Accepted Answer

If the exchange qualifies as a reorganization under Section 368 of the Internal Revenue Code, Mrs. Lindt will not recognize any gain or loss on the exchange. Therefore, her basis in the Newland stock will be the same as her basis in the Nipher stock, which is $49,200. Option A is incorrect because Mrs. Lindt's basis in the Newland stock is not equal to the fair market value of the stock received. Option B is incorrect because the lack of cash received does not automatically mean there is no gain recognized. Option D is incorrect because option C is true.

Mrs Lindt Exchanged 212 Shares of Nipher Common Stock for 773