A$)$ High Tech Corporation $($HTC$)$ is organized as a California corporation on January $1,$

$2010$ and makes an S election effective January $1,2010.$ None of the shareholders is

or will be married at the date they receive or later sell their HTC shares.

B$)$ Effective January $1,2010,$ four founders $$Founders$$ contribute intellectual property

to HTC for $1$ million common shares each in a transaction that is tax free pursuant to

IRC Section $351.$ The intellectual property contributed was worth $$8$ million, and the

initial valuation of the stock is $$2$ million for each of the four equal shareholders.

C$)$ On January $1,2012,$ HTC revokes its S election. On January $2,$ when HTC is a C

corporation, venture capital firms $($VCs$)$ contribute $$10$ million for $1$ million

preferred HTC shares.

Note that funding of this magnitude will inevitably come from VCs who will insist

that they are investing in a C corporation for a variety of their own tax and legal

reasons.

D$)$ Each VC firm is organized as a partnership for federal income tax purposes.

E$)$ HTC meets the $$active business requirements$$ described in IRC Section $1202($e$).$

F$)$ There have not been any redemptions of its stock by HTC at any time.

G$)$ None of the provisions of IRC Section $1202($f$),1202($h$),$ or $1202($j$)$ are applicable.

H$)$ All partners in the VC partnerships are individuals that owned the same percent of

VC at the date of the HTC investment and the HTC sale.

I$)$ The HTC stock is sold to an unrelated party for $$150$ million cash on January $1,2018$

with $$25$ million to each of the $4$ common shareholders and $$50$ million to the VCs$.$

Assume that HTC was not an S corporation on the date that the four common

shareholders became shareholders. What is the maximum $1202($a$)$ exclusion for each of the four shareholders as determined by IRC Section $1202($b$).$ This scenario takes place in USA. Refer to IRC $1202$