Rebecca holds 100 shares of Gotcha stock that she purchased for $1000 several years ago. In a...

Question:

Rebecca holds 100 shares of Gotcha stock that she purchased for $1000 several years ago. In a merger of Gotchas into Solis, Inc, Rebecca exchanges her 100 Gotcha shares for 1000 Solis shares and $500. Gotcha is valued at $40 per share and Solis at $3.50 per share.

A. What is Rebecca's realized and recognized gain/loss from the reorganization?

B. What is Rebecca's basis in her Solis stock?

Stock Swap

Stock Swap happens when two companies merge and only one will survive, in that regards, the absorbed company?s investors would need to exchange or swap its old stocks to a new one, hence, the name.

Answer and Explanation:

A. What is Rebecca's realized and recognized gain/loss from the reorganization?

Account Name Debit Credit Remarks
Solis Inc., Investment
(1,00...

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Stocks & Pillory: Definition & Punishment

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