Celeste transferred 100 percent of her stock in Supply Chain Company to Marketing Corporation in a Type A merger. In exchange, she received stock in Marketing with a fair market value of $513,500 plus $513,500 in cash. Celeste's tax basis in the Supply Chain stock was $1,340,000. What amount of loss does Celeste recognize in the exchange and what is her basis in the Marketing stock she receives

Marketing Stock Basis of $826,500

Explanation:

a) She will recognize no loss as the exchange is TAX DEFERRED.

b) The Stock Basis is calculated with the following formula,

Stock basis = Carryover Basis - Cash received

Plugging in the figures therefore we will have,

Stock Basis = $1,340,000 -$513,500

= $826,500.

If Celeste had sold stocks at $513,500, she would have suffered a loss of $313,000 (826,500 - 513,500).

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"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"