Mars Corporation Merges into Jupiter Corporation by Exchanging All of Its

Multiple Choice

Mars Corporation merges into Jupiter Corporation by exchanging all of its assets for 300,000 shares of Jupiter stock valued at $2 per share and $100,000 cash. Wanda, the sole shareholder of Mars, surrenders her Mars stock (basis $900,000) and receives all of the Jupiter stock transferred to Mars plus the $100,000. How does Wanda treat this transaction on her tax return?

A) Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $900,000.
B) Wanda recognizes a loss of $100,000. Her Jupiter stock basis is $800,000.
C) Wanda recognizes a $100,000 gain. Her Jupiter stock basis is $700,000.
D) Wanda realizes a $200,000 loss of which $100,000 is recognized. Her Jupiter stock basis is $1 million.
E) None of the above.