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What result to the shareholders on the exchange

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Question - Recap Corporation has $100,000 of accumulated earnings and profits and makes a pro rata distribution to each of its ten shareholders of new common voting stock worth $20,000 and new callable preferred stock worth $10,000 in exchange for each shareholder's old common voting stock worth $30,000. Assume that the new Recap preferred stock is not nonqualified preferred stock.

1. What result to the shareholders on the exchange?

2. What result when Recap calls the preferred stock?

Reference no: EM132607468

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