Q:

Gain Recognition and Basis Computation

Jed acquired 25 percent of the stock of Alpha Corporation (basis of $100,000) 12 years ago, and the other 75 percent was purchased by Zia (basis of $510,000) three years ago. Jed also holds a 10-year, $150,000 Alpha bond paying 6 percent interest.

Alpha enters into a tax-free consolidation with Beta Corporation, in which Jed will get an 8% interest in the new AlphaBeta Corporation (value $144,000) plus $36,000 and Zia will get a 27% interest (value $486,000) plus $54,000 of land. Alpha's basis in the land is $35,000. Jed also may exchange his $150,000 Alpha bond for a 10-year, $155,000 AlphaBeta bond paying 5.8 percent interest.

Before the distributions or reorganization to its shareholders, Alpha's value is $720,000, and Beta's value is $1,170,000.

If an amount is zero, enter "0".

a. What are Zia's and Jed's bases in their new AlphaBeta stock?

Jed: $

Zia: $

b. What is the net amount of gain (loss) identified by Jed, Zia, Alpha, and Beta on the reorganization?