Reference no: EM133149965
Question - Eli has assets worth $1500 with an adjusted basis of $250, The company has common stock outstanding and bonds held by creditors. Michael, a bondholder, exchanges $100,000 of 5% bonds in exchange for $100,000 of voting stock in Eli. His basis in the bonds was $95,000 and acquired the bonds 8 years ago.
1. How much if any gain or loss does Michael from the previous transaction recognize when he exchanges his bonds for stock?
2. What is Michael's Adjusted basis in the stock he received?
3. What is Michael's holding period in the stock he receives?
Suppose in addition to the stock for the bonds Michael received additional stock worth $500 for accrued interest on the bonds at the time of the exchange.
1. How much if any income does Michael report with respect to the stock received for the interest?
2. What is Michael's holding period in the stock received for interest?
Suppose instead Michael was a common stock shareholder. His basis in the stock was $92,000. He exchanges the stock for $100,000 in Eli 3% bonds worth $98,000.
1. What if any gain or loss does Michael recognize?
2. What is Michael's holding period in the bonds?
3. If Eli changes its name to Mary how much gain or loss does Mary (formerly known as Eli) recognize?
4. What is the reason for your answer to the previous question?
5. After the transaction what is the basis of Mary's assets?
6. How much gain or loss would Eli's shareholder's recognize if Eli changed its place of incorporation from Nevada to Delaware?
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