Problem
Armor Corporation exchanges $1 million of its common stock and $300,000 of Armor bonds for all of Trail Corporation's outstanding stock. As part of the same transaction, Trail then merges into Armor, which receives assets having a $1.3 million Flvl'vIr and an $875,000 adjusted basis. In the merger, Antonello, a Trail shareholder, exchanges his 20% interest in Trail's single class of stock for $200,000 in Armor stock and $60,000 in Armor bonds. Antonello's 20% interest in Trail is comgrised of 4,000 shares having a $100,000 adjusted basis. Following the reorganization, Antonello owns 5% (1,000 shares) of Armor's stock. Armor's EEP balance is $375,000.
A. What is the amount of Trail's recognized gain or loss in the asset transfer?
B. What is Armor's basis in the assets received in the exchange?
C. What are the amount and character of Antonello's recognized gain or loss?
D. What is Antonello's basis in the Armor stock? In the Armor bonds?