Outstanding shares of binder corporation stock

Assignment Help Financial Management

Reference no: EM13883181

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 Clopper 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?

Buddy recognizes $200,000 as dividend income.

Buddy recognizes $200,000 as a capital gain.

Buddy recognizes $150,000 as dividend income.

Buddy recognizes $150,000 as a capital gain.

Reference no: EM13883181

Questions Cloud

Bond with an invoice price-what is the clean price of bond : You purchase a bond with an invoice price of $1152.32. The bond has a coupon rate of 8.39 percent, and there are 4 months to the next semi annual coupon date. What is the clean price of the bond?

What will the stock price be in three years : The Jackson–Timberlake Wardrobe Co. just paid a dividend of $9.72 per share on its stock. The dividends are expected to grow at a constant rate of 2.18 percent per year indefinitely. Investors require a return of 6.58 percent on the company's stock. ..

Well-diversified portfolio : Assume that you hold a well-diversified portfolio that has an expected return of 11.0% and a beta of 1.20. You are in the process of buying 1,000 shares of Alpha Corp at $10 a share and adding it to your portfolio. Alpha has an expected return of 20...

Statements comparing a profit-sharing plan to pension plan : Defined-benefit plans are favourable to employees for which of the following reasons. All of the following statements comparing a profit-sharing plan to a pension plan are correct, EXCEPT: All the following statements concerning qualified target-bene..

Outstanding shares of binder corporation stock : 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 and Bruce each own 25% of Clip..

Nominal annual yield on investment-convertible semi-annually : A woman purchases a 10-year par bond with 8% semi-annual coupons. The bond is priced to yield 7.5% converted semi-annually. The coupons are reinvested in a fund paying 7.0% nominal, converted semi-annually. What is her nominal annual yield on this in..

Two different conveyor belt systems : Lang Industrial Systems Company (LISC) is trying to decide between two different conveyor belt systems. System A costs $244,000, has a four-year life, and requires $76,000 in pretax annual operating costs. System B costs $342,000, has a six-year life..

Place a market buy-order : Buying Stock with a Market Order You would like to buy shares of Ralph Lauren (RL). The current bid and ask quotes are $85.18 and $85.30, respectively. You place a market buy-order for 500 shares that executes at these quoted prices. How much money d..

What is the aftertax cash flow from the sale of this asset : Consider an asset that costs $576,000 and is depreciated straight-line to zero over its eight-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $167,000. If the relevant tax rate is 35..

User Account

All Pages