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Buddy owns 100 of the outstanding shares of Binder Corporation stock. Buddy's basis in his Binder Corporation stock is $100,000. Binder Corporation is merged with Clipper Corporation in a tax-free reorganization. Buddy receives 50 shares of Clipper stock worth $150,000 and $150,000 cash. The remaining 100 shares of Binder stock were owned by Bruce who received the same consideration for his Binder stock. Binder and Clipper have E&P balances of $250,000 and $500,000, respectively. Buddy and Bruce each own 25% of Clipper Corporation's 200 shares of stock after the reorganization. Which of the following is correct?
A) Buddy recognizes $200,000 as dividend income.
B) Buddy recognizes $200,000 as a capital gain.
C) Buddy recognizes $150,000 as dividend income.
D) Buddy recognizes $150,000 as a capital gain.
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Prentice Hall's Federal Taxation 2014 Corporations, Partnerships, Estates & Trusts

Prentice Hall's Federal Taxation 2014 Corporations, Partnerships, Estates & Trusts


Edition: 27th
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That's not philosophy, it's geometry
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Every man, wherever he goes, is encompassed by a cloud of comforting convictions, which move with him like flies on a summer day.
   --Bertrand Russell, 1950

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