Dipper Corporation Is Acquiring Bulbul Corporation by Exchanging 220,000 Shares

Essay

Dipper Corporation is acquiring Bulbul Corporation by exchanging 220,000 shares of Dipper stock and $80,000 cash for all of Bulbul's assets (valued at $500,000),liabilities ($200,000),and accumulated earnings and profits ($120,000).Betty purchased 40% of Bulbul five years ago for $60,000,and Keith purchased the remaining 60% for $90,000.What is the amount and character of the gain or loss that Betty and Keith recognize (if any),assuming that the exchange qualifies as a § 368 reorganization? What is the basis in their new Dipper stock?