Reed Corp, a hardware/gift boutique/caf business was incorporated in Texas on April 15, 2021 (calendar year end,

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Question:

Reed Corp, a hardware/gift boutique/café business was incorporated in Texas on April 15, 2021 (calendar year end, accrual basis taxpayer).

Business operations began on July 1, 2021.

Reed Corp incurred the following expenses related to the start of business.

Employee training costs incurred on June 10, 2021	$2,000
Expenses related to retail site selection (engineering inspection, air quality) incurred on May 1, 2021	$1,500
Legal expenses for filing the corporate charter incurred on April 1, 2021	$3,500
Legal expenses to modify the bylaws on August 2, 2021	$4,000

What amount of the costs listed above will be recovered (i.e., deducted) in 2021?

A. $10,000

B. $10,033

C. $8,500

D. $8,583

E. None of the above

In the context of an IRC Sec. 351 transaction, which of the following statements correctly describes the concept of control?

A. Control is defined as the ownership of 80% or more of the corporation’s voting common stock.

B. A transferor (a sole shareholder) must maintain control of a corporation until at least the end of the taxable year to benefit from a 351 transaction.

C. A contribution of only services by a transferor in return for 25% of all of the shares of the corporation would mean that any remaining transferors could not be in control of the corporation.

D. Control is defined as the ownership of 80% or more of a corporation’s voting stock and 80% or more of the fair market value of a corporation’s stock.

E. Control is defined as the ownership of 80% or more of a corporation’s voting stock and 80% or more of the total number of shares of each class of nonvoting stock.

F. A transferor may contribute a nominal amount of property so that other transferors can enjoy the benefits of an IRC Sec. 351 transaction so long as there are no shares issued in exchange for services.