5. In appropriate situations the IRS may assert

That the Corporation be disregarded as a sham or nominee

That income reported by the Corporation belongs on the shareholders personal Form

1040 Schedule C under the assignment of income principles.

Income is reallocated under 482 to unrelated organizations

Tax benefits may be denied under 269 if control of a Corporation is acquired for a

purpose of avoiding federal income tax.

All of the above

All of the above except C

All of the above except D

All of the above except C & D

6. Corporation X sells 100 shares of its Treasury stock to a new shareholder for $5 per share. The Shareholder owns less than 80% of the Corporation. Which are True or False?

_______ a. Corp. X reports $500 gross income _______ b. Corp. X does not report any gross income. _______ c. Give Code Section in support of your answer

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7. Which of the following is True or False?

_______ a. A transferor of property to a Corporation may elect Section 351 to avoid recognition of gain or loss.

_______ b. A transferor of property to a Corporation may elect Section 351 to avoid recognition of gain or loss only if the shareholder acquires requisite control of the Corporation.

_______ c. If A transfers property to Corp. X basis $10 Fair Market Value (FMV) $100 in exchange for stock representing 51% of the issued and outstanding shares, A recognizes $90 of gain.

_______ d. In c above, the basis of the stock received by A is $100 _______ e. In c above, the Corporations basis in the property received is $10

8. True or False:

A transfers property worth $1,000 with a basis of $10 to form Corp. X. B provides $1,000 of services to form Corp. X. C. A & B each receive 50% of the stock. _______ a. As contribution is tax free to A

_______ b. Bs contribution is tax free to B

_______ c. Bs contribution is tax free to B if B also contributes property worth $10.

_______ d. In question 8 above, assume A was indebted to B for past compensation representing $1,000 of past services B performed for As proprietorship. A would recognize income of $1,000 if B receives her stock in payment for these services.

_______ 9. Which of the following constitute property for purposes of 351

Money

Debt of Transferee evidenced by a security

Debt of Transferee NOT evidenced by a security

Interest accrued on b & c after the Transferor acquired the debt

Only A

OnlyA&B

Only A, B, & d

All of the above

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10. A transfers property to Corp. X for 100% of the issued shares as follows: Property adjusted basis $10,500; Fair Market Value (FMV) $50,000

A receives 100 Shares Stock, Property with FMV of $10,000 and Cash of $10,500.

Show Computations.

As realized gain is $ ________________

As recognized gain is $ ________________

Give Code Section to Part b. ________________

As basis in the stock received is $ ________________

Give Code Section to Part d. ________________

As basis in the property received $ ________________