Acme Corporation acquires Fisher Corporation's assets in a Type A reorganization for $800,000 of Acme's nonvoting preferred stock and $200,000 (face amount and FMV)of securities. The assets have an adjusted basis of $600,000 and an FMV of $1,500,000. In addition, Acme Corporation assumes $500,000 of Fisher's liabilities. At the time of the transfer, Acme's E&P is $400,000. Fisher distributes the stock and securities to its sole shareholder Barbara for all of her Fisher stock. After the reorganization, Barbara owns 25% of Acme's stock. Barbara has an adjusted basis of $400,000 in her Fisher stock. Barbara's basis for her Acme securities is

Question

Quizplus · Accepted Answer

Barbara's basis in the Acme securities is $200,000, which is the face amount and FMV of the securities she received. In a Type A reorganization, the basis of the property received (in this case, the securities) is generally the same as the basis of the property exchanged (her Fisher stock), adjusted for any money received or liabilities assumed. However, since the securities are specified with a face amount and FMV of $200,000, and this is part of the consideration received, it directly establishes the basis for those securities.

Acme Corporation Acquires Fisher Corporation's Assets in a Type a Reorganization