Corporate Taxation Paper 6

1

In 2009, Celia Mueller bought a $1,000 bond issued by Disco Corporation for $1,100. Instead of paying off the bondholders in cash, Disco issued 100 shares of preferred stock in 2012 for each bond outstanding. The preferred stock had a fair market value of $15 per share. What is the recognized gain to be reported by Mueller in 2012?






2

On April 1, 2012, in connection with a recapitalization of Oakbrook Corporation, Mary Roberts exchanged 500 shares that cost her $95,000 for 1,000 shares of new stock worth $91,000 and bonds in the principal amount of $10,000 with a fair market value of $10,500. What is the amount of Roberts’ recognized gain during 2012?






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