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Silver Corporation redeems all of Alluvia"s 3,000 shares and distributes to her 1,000 shares of Gold Corporation stock plus $20,000 cash. Alluvia"s basis in her 30% interest in Silver is $80,000 and the stock"s market value is $120,000. At the time Silver is acquired by Gold, the accumulated earnings and profits of Silver are $100,000 and Gold"s are $50,000. How does Alluvia treat this transaction for tax purposes?

A. No gain is recognized by Alluvia in this reorganization.

B. Alluvia reports a $20,000 recognized dividend.

C. Alluvia reports a $20,000 recognized capital gain.

D. Alluvia reports a $15,000 recognized dividend and a $5,000 capital gain.

E. None of the above.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M991271

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