Two individuals, Frank and Sam, form a new corporation. The following transactions are made pursuant to...

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Two individuals, Frank and Sam, form a new corporation. The following transactions are made pursuant to agreement of incorporation. In exchange for 2/3 (66.67 percent) of the stock in the newly formed corporation, Frank contributes: • Furniture and Fixtures with an adjusted basis of $25,000 and an FMV of $50,000, and • Land with an adjusted basis of $25,000 and an FMV of $50,000. In exchange for 1/3 (33.33 percent) of the stock in the newly formed corporation, Sam contributes services performed with an FMV of $50,000 Based upon the above information: 1. Does IRC § 351 apply to these transactions? 2. What, if any, effect does the formation of this corporation have on Frank and Sam? 3. What is Frank's basis in the stock of the new corporation? 4. What is Sam's basis in the stock of the new corporation? Two individuals, Frank and Sam, form a new corporation. The following transactions are made pursuant to agreement of incorporation. In exchange for 2/3 (66.67 percent) of the stock in the newly formed corporation, Frank contributes: • Furniture and Fixtures with an adjusted basis of $25,000 and an FMV of $50,000, and • Land with an adjusted basis of $25,000 and an FMV of $50,000. In exchange for 1/3 (33.33 percent) of the stock in the newly formed corporation, Sam contributes services performed with an FMV of $50,000 Based upon the above information: 1. Does IRC § 351 apply to these transactions? 2. What, if any, effect does the formation of this corporation have on Frank and Sam? 3. What is Frank's basis in the stock of the new corporation? 4. What is Sam's basis in the stock of the new corporation?

Answer rating: 100% (QA)

Answer 1 Section 351 of the Internal Revenue Code does not apply to the aforementioned transactions 2 Neither Frank nor Sam will be affected in any way by the establishment of the corporation 3 The co... View the full answer