Last year, Mrs. Kahn and Mrs. Toms each contributed the assets of their respective sole proprietorships to a new corporation. The shareholders believed that by combining their businesses, they could increase profitability. They were encouraged to do so because they could transfer their assets in exchange for stock without recognizing gain. Unfortunately, Mrs. Kahn and Mrs. Toms discovered that they couldn't work together effectively. They agreed to part company by dissolving the corporation and taking back ownership of their respective assets (essentially just reversing the incorporation process).