Saucer Corporation Has a Value of $800,000, Basis in Its

Multiple Choice

Saucer Corporation has a value of $800,000, basis in its assets of $670,000, and liabilities of $200,000. Cup Corporation acquires 90% of Saucer's assets by exchanging $550,000 of its voting stock, $20,000 cash, and assuming $150,000 of Saucer's liabilities. The remaining 10% of Saucer's assets not acquired is $80,000 cash. Saucer distributes the Cup stock, $100,000 in cash and associated $50,000 in liabilities to its shareholder, Sam, in exchange for his Saucer stock basis $560,000) . Saucer then liquidates. How will this transaction be treated for tax purposes?

A) As a "Type A" reorganization. Sam recognizes $50,000 gain and Saucer recognizes $20,000 gain.
B) As a "Type A" reorganization. Sam recognizes $100,000 gain and Saucer recognizes $120,000 gain.
C) As a "Type C" reorganization. Sam recognizes $50,000 gain and Saucer recognizes $20,000 gain.
D) As a "Type C" reorganization. Sam recognizes $40,000 gain and Saucer recognizes no gain.
E) As a taxable transaction.