1. C and D jointly organized Z corporation. C transfers in property Z in exchange for $500 in cash and 45 shares of Z's stcok. D transfers $500 in cash to Z in exchange for the other half of Z's stock (that is, the other 45 shares). Z also issues 5 shares of its stock to lawyer in payment of lawyer's bill for legal services in organizing Z.

a). This is not a good 351 transaction since property transferors do not have control immediately afterwards. Lawyer has received shares for services.

b). This is not a good 351 transactions because the property transferors do not control 80% of the shares since A only receives 45 shares.

c). This transfer qualifies fro non-recognition under 351

d). None of the above

2. C and D jointly organize Z Corporation. C transfers properties to Z in exchange for $150 cash and half of Z’s stock. D transfers $150 in cash to Z in exchange for the other half of the stock. C’s property consists of two parcels, parcel 1 with a basis of $120 and a value of $240 and parcel 2 with a basis of $90 and a value of $60.

A. Under 351 C has a net gain of $90 on the transfer of the two parcels and must recognize that amount of the gain because of the $150 cash boot.

B. C’s stock basis in its stock received is the basis of $210 plus $150 gain realized minus $150 cash received or $210.

C. C has a gain of $120 on parcel 1 which is recognized and a loss of $30 on parcel 2 which is not recognized.

D. C has a basis of $180 in all of the stock based on a basis of $210 in the property transferred in plus $120 in gain realized less $150 in cash received.

Answer rating: 100% (QA)

1 C This transfer qualifies for nonreco... View the full answer