Korat Corporation and Snow Corporation Enter into an Acquisitive "Type

Multiple Choice

Korat Corporation and Snow Corporation enter into an acquisitive "Type D" reorganization.Xin currently holds a 20-year, $10,000 Snow bond paying 4% interest.There are 8 years until the bond matures.In exchange for his Snow bond, Xin receives an 8 year $16,000 Korat bond paying 2.5% interest.Xin thinks this is fair because he will still receive $400 of interest each year and both bonds mature on the same date.How does Xin treat this transaction on his tax return?

A) Xin recognizes no gain or loss on the exchange of bonds.
B) Xin recognizes $750 gain each year for the next 8 years.
C) Xin recognizes $6,000 capital gain.
D) Xin recognizes $6,000 ordinary gain.
E) None of the above.