As a tax professional, you will have many questions that will be asked of you that...
Fantastic news! We've Found the answer you've been seeking!
Transcribed Image Text:
As a tax professional, you will have many questions that will be asked of you that will often require either minimal or significant research. This is how you stay gainfully employed in the tax profession because there's always something to learn and there's always a question that your client's want answered. Chapter 18 is the first chapter where we delve into how exactly a corporation is formed and what qualifies as a contribution under IRC Section 351 which would qualify for the nonrecognition of the gain or loss under IRC Section 351. This gain or loss is simply deferred and not a complete exclusion. See Example 1 on page 18-3 of the text for more information. For IRC Section 351 to apply three requirements must be met which are as follows: (1). Property is transferred (2). In exchange for stock and (3). The property transferors are in control of the corporation after the exchange Remember that all 3 requirements must be met in order for IRC section 351 to apply and consider the following question from your client. Scenario: You have a client named Lisa Lime who is so excited about recently developing a natural deodorant formula that has proven to be a hit. She contributes a nonexclusive license to use her new patented deodorant to her wholly owned corporation, Lisa, Inc. for 100 shares of stock. Does IRC Section 351 apply? Why or Why not? Explain your research in a letter to Lisa and a memo for the firm's files. Lisa's address is 1234 Main Street Omaha, NE 68102. to your client and for the memo for the firm's files. In your memo for the firm's files, mention the Revenue Ruling that Revenue Ruling 69-156 modifies. Lastly, remember that for this assignment you are writing one letter to your client AND one for the firm. Keep that in mind when writing your responses. A client may not understand all of the technical terms, but the technical information may be appropriate for the memo for the firm's files. As a tax professional, you will have many questions that will be asked of you that will often require either minimal or significant research. This is how you stay gainfully employed in the tax profession because there's always something to learn and there's always a question that your client's want answered. Chapter 18 is the first chapter where we delve into how exactly a corporation is formed and what qualifies as a contribution under IRC Section 351 which would qualify for the nonrecognition of the gain or loss under IRC Section 351. This gain or loss is simply deferred and not a complete exclusion. See Example 1 on page 18-3 of the text for more information. For IRC Section 351 to apply three requirements must be met which are as follows: (1). Property is transferred (2). In exchange for stock and (3). The property transferors are in control of the corporation after the exchange Remember that all 3 requirements must be met in order for IRC section 351 to apply and consider the following question from your client. Scenario: You have a client named Lisa Lime who is so excited about recently developing a natural deodorant formula that has proven to be a hit. She contributes a nonexclusive license to use her new patented deodorant to her wholly owned corporation, Lisa, Inc. for 100 shares of stock. Does IRC Section 351 apply? Why or Why not? Explain your research in a letter to Lisa and a memo for the firm's files. Lisa's address is 1234 Main Street Omaha, NE 68102. to your client and for the memo for the firm's files. In your memo for the firm's files, mention the Revenue Ruling that Revenue Ruling 69-156 modifies. Lastly, remember that for this assignment you are writing one letter to your client AND one for the firm. Keep that in mind when writing your responses. A client may not understand all of the technical terms, but the technical information may be appropriate for the memo for the firm's files.
Expert Answer:
Answer rating: 100% (QA)
Dear Lisa Based on the information you have provided it appears that IRC Section 351 may apply ... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
A particle is thrown vertically upwards into the air. Its height s (in m) above the ground after time t (in seconds) is given by s = 25t 5t 2 (a) What height does the particle reach? (b)What is its...
-
The year-end financial statements of Fighting Illini Financial Services are provided below. Required: 1. Record year-end closing entries. 2. Prepare a post-closing trial balance. FIGHTING ILLINI...
-
On December 31, Hurley Corporation issues $500,000, 5-year, 12% bonds at 96 with interest payable on December 31, 2019. The entry on December 31, 2020, to record payment of bond interest and the...
-
What are some problems that may crop up in groups and teams?
-
Jordan Broadcasting Company is going public at $50 net per share to the company. There also are founding stockholders that are selling part of their shares at the same price. Prior to the offering,...
-
Sue made the following outright gifts during one year: $1,014,000 to her husband; $1,014,000 to her son; and $1,014,000 to charity. Assume an annual exclusion of $14,000 for the year of the gift....
-
1. Provide a detailed discussion of the intentional and unintentional rating distortion factors that may come into play in this situation. 2. Evaluate the kinds of training programs that could...
-
Compute the following, if possible, for the matrices c-[-5 8 E= F= 2 O 2 8 6 2 D= [1] [3 * (a) A + B * (b) C+ D * (c) 4A (d) 2A-4B * (e) C+ 3F - E (f) A-B+E *(g) 2A - 3E - B (h) 2D - 3F * (i) AT + ET...
-
Erin computes a \(95 \%\) confidence interval for \(\mu\) and obtains (94.6, 98.3). Jamal performs a test of the hypotheses \(H_{0}: \mu=100\) versus \(H_{1}: \mu eq 100\) and obtains a \(P\)-value...
-
A \(99 \%\) confidence interval for \(\mu\) is \((5.1,5.8)\). Someone wants to use the data from which this confidence interval was constructed to test \(H_{0}: \mu=6\) versus \(H_{1}: \mu eq 6\)....
-
To construct a confidence interval for each of the following quantities, say whether it would be better to use paired samples or independent samples. a. The mean difference in weight loss between...
-
Scores on a certain IQ test are known to have a mean of 100 . A random sample of 60 students attend a series of coaching classes before taking the test. Let \(\mu\) be the population mean IQ score...
-
A sample of size \(n=100\) is used to test \(H_{0}: \mu \leq 20\) versus \(H_{1}: \mu>20\). The value of \(\mu\) will not have practical significance unless \(\mu>25\). The population standard...
-
Made of high-strength steel, a tie rod is a slender cylindrical structure used to push (compression) and pull (tension) the front tires when the steering wheel is turning (Figure 2). The radius and...
-
Prove that if Σ an is absolutely convergent, then a. an
-
The account balances of Islewood Ltd. and Richmond Ltd. at January 1, 2013, were as follows: The fair values of Richmonds assets at January 1, 2013, were: Land .............240,000...
-
Financial information at December 31, 2013, of Spider and its subsidiary company, Hudson, includes the following. At January 1, 2010, the date Spider acquired its 80% shareholding in Hudson, all of...
-
Using an example, explain how the business combination adjustments affect the fair value adjustments.
-
Under the provisions of the Companies Act 1985 an auditor's report must be attached to a company's financial statements. Is this true for all companies? Explain.
-
State the major changes which have occurred in auditing techniques during the last 160 years. Explain briefly how changes in technology have impacted on the changes in auditing techniques.
-
Outline briefly the development of corporate accountability over the past 160 years.
Study smarter with the SolutionInn App