Simone Transferred 100 Percent of Her Stock in Purple Company

Multiple Choice

Simone transferred 100 percent of her stock in Purple Company to Plum Corporation in a Type A merger. In exchange, she received stock in Plum with a fair market value of $720,000 plus $720,000 in cash. Simone's tax basis in the Purple stock was $277,000. What amount of gain does Simone recognize in the exchange and what is her basis in the Plum stock she receives?

A) $1,163,000 gain recognized and a basis in Plum stock of $1,440,000
B) $1,163,000 gain recognized and a basis in Plum stock of $720,000
C) $720,000 gain recognized and a basis in Plum stock of $720,000
D) $720,000 gain recognized and a basis in Plum stock of $277,000