Yellow Corporation and Green Corporation Enter into a "Type A

Multiple Choice

Yellow Corporation and Green Corporation enter into a "Type A" reorganization.Raul currently holds a 15-year $100,000 Green bond paying 6% interest.In exchange for his Green bond,Raul receives a 5-year $125,000 Yellow bond paying 5% interest.Raul is happy with the Yellow bond because,even though it pays a lower interest rate,the yield provides slightly more interest than the Green bond,and both bonds mature on the same date.How does Raul treat this transaction on his tax return?

A) Raul recognizes gain of $25,000 on the exchange ($125,000 - $100,000) .
B) Raul recognizes a $5,000 gain ($100,000 * 6% = $120,000 * 5%;$125,000 - $120,000 = $5,000) .
C) Raul recognizes $1,250 gain ($5,000 * 5% * 5 years remaining on bond) .
D) Raul has no gain because he exchanges a security for a security.
E) None of the above.