EA2 Unit 13.1-13.2 Corporate Formation

A sole proprietor incorporates their business, contributing both capital assets and Section 1231 property. How is the holding period determined for the shares received in exchange?

A shareholder contributes services in exchange for stock in a newly formed corporation. How is the shareholder's basis in the stock determined?

A corporation receives property from a shareholder in exchange for stock. The shareholder recognizes a gain on the transfer. How does the corporation determine its basis in the property?

A corporation receives equipment with a built-in loss (adjusted basis exceeds fair market value) from a shareholder in exchange for stock. What is the corporation's basis in the equipment for depreciation purposes?

Under Section 351, what condition must be met immediately after the exchange to qualify for nonrecognition of gain or loss on property transferred to a corporation?

Which of the following is not considered property for the purposes of Section 351?

When stock is exchanged for services, how is the value of the stock treated for income tax purposes?

Which characteristic would disqualify preferred stock from being counted towards the 80% ownership test in a Section 351 exchange?

Which of the following scenarios would be considered a transfer of 'property' under Section 351?

A taxpayer transfers an asset with a basis of $20,000 to a corporation solely for stock worth $30,000 in a Section 351 exchange. What amount of gain should the taxpayer recognise?

Regarding Section 351 property exchange for stock in a corporation, what is required to be attached to the tax returns?

A shareholder contributes property to a corporation in exchange for stock and cash (boot). The property has a basis of $30,000 and a fair market value of $50,000, and the shareholder receives $10,000 in cash. What is the shareholder's recognized gain?

If the fair market value (FMV) of property received in an exchange cannot be ascertained, what value should be used?

What percentage of stock must a shareholder hold immediately after a Section 351 transaction to potentially maintain the same basis in transferred property?

In a Section 351 transaction, which of the following factors could affect the corporation's basis in the property received?

Shareholder A contributed land in exchange for 90% of stock. Shareholder also receives cash. How is the cash treated in determining the corporation's basis in the land?

If a shareholder contributes property to a corporation in a Section 351 exchange and receives both stock and cash (boot), how does the boot affect the shareholder's recognized gain?

A shareholder transfers property with a basis of $50,000 and a fair market value of $80,000 to a corporation in a Section 351 exchange. The shareholder receives stock worth $60,000 and cash of $20,000. What is the shareholder's recognized gain?

In an exchange transaction, Jesse Jenkins transferred land worth $50,000 to his 80 percent controlled corporation for additional stock of the corporation worth $20,000 and cash of $20,000. The basis of the property to him was $15,000 and was subject to a $10,000 mortgage which the corporation assumed. Jenkins must report a gain of:

Mr. Smith transferred a building that had an adjusted basis of $50,000 and a fair market value of $105,000 to XYZ Corporation in exchange for 100% of XYZ's stock and $10,000 cash. The building was subject to a mortgage of $20,000, which XYZ assumed for valid business reasons. The fair market value of the stock on the date of the transfer was $75,000. What are the amounts of Smith's realized gain and recognized gain?

Andrew transferred an office building that had an adjusted basis of $180,000 and a fair market value of $350,000 to Barry Corporation in exchange for 80% of Barry's only class of stock. The building was subject to a mortgage of $200,000, which Barry assumed for valid business reasons. The fair market value of the stock on the date of the transfer was $150,000. What is the amount of Andrew's recognized gain?

Ms. D transferred the following assets to Corporation E: Adjusted Basis Fair Market Value Cash $1,000 $1,000 Equipment 2,000 1,500 Land 4,500 6,000 In exchange, Ms. D received 51% of E's only class of outstanding stock. The stock had no established value. What is Corporation E's total basis in all the assets received, assuming that Ms. D recognized the correct amount of gain on the exchange?

Hank transfers land with an adjusted basis of $500,000 to Handy Hank's, Inc. In exchange, he receives shares of stock with a fair market value of $300,000 and cash in the amount of $175,000. Hank owns 51% of all the outstanding stock of Handy Hank's, Inc., immediately after the transfer. What is Hank's deductible loss on the transaction, if any?

Jack transferred property having an adjusted basis of $42,000 and a fair market value of $50,000 to Corporation X. In exchange for the property, he received $5,000 cash, an automobile having an adjusted basis of $6,000 and a fair market value of $10,000, and 80% of Corporation X's only class of stock. At the time of the transfer, the Corporation X stock that Jack received had a fair market value of $35,000. What is the amount of Jack's recognized gain?

Sam owns 100% of M Corporation's single class of stock. Sam transfers land and a building having a $30,000 and $100,000 adjusted basis, respectively, to M Corporation in exchange for additional M Corporation common stock worth $200,000 and Q Corporation stock worth $20,000. The Q Corporation stock had a $5,000 basis on M Corporation's books. Peter transfers $50,000 in cash for 15% of the M Corporation common stock. What amount of gain or loss is recognized by Sam and M Corporation on the exchange?

In a Sec. 351 transaction, Mr. Biller transferred assets with an adjusted basis of $76,000 and a fair market value of $80,000 to Bay View Corporation in exchange for its capital stock with a fair market value of $72,000. Bay View Corporation also assumed a liability from Mr. Biller of $81,000. What is Mr. Biller's recognized gain?

Sarah acquired 90% of Fast Corporation's shares in exchange for consulting services worth $85,000. The fair market value of 90% of Fast Corporation's shares is $93,500. How much income does Sarah recognize?

Anthony, Bill, and Chester decided to form Paradise Corporation. Anthony transferred property with an adjusted basis of $35,000 and a fair market value of $44,000 for 440 shares of stock. Bill exchanged $33,000 cash for 330 shares of stock. Chester performed services valued at $33,000 for 330 shares of stock. The fair market value of Paradise Corporation's stock is $100 per share. What is Paradise's basis in the property received from Anthony?

Mr. L transferred the following assets and liabilities to Corporation K: Adjusted Basis | Fair Market Value Building $10,000 | $60,000 Mortgage on building 40,000 | 40,000 Truck 5,000 | 10,000 Machine 20,000 | 15,000 In the exchange, Mr. L received 95% of K's only class of outstanding stock. What is K's total basis in the assets received, assuming that Mr. L properly recognized the true amount of gain on the exchange?

Ms. R transferred property with an adjusted basis of $35,000 and a fair market value of $40,000 to Rain Corporation in exchange for 60% of Rain Corporation's only class of stock. At the time of transfer, the stock Ms. R received had a fair market value of $45,000. What is Rain Corporation's basis in the property after the exchange?

Section 351 requires that no gain or loss be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in the corporation

Stock exchanged for services is counted toward the 80%-ownership

To the extent the shareholder receives the corporation's stock solely in exchange for property, nonrecognition is required.

The shareholder recognizes gain realized to the extent of money and the FMV of other property received in the exchange.

The corporation recognizes no gain on exchange of its stock for property (including money).

The shareholder recognizes gain realized to the extent of money and the [blank] of other property received in the exchange.