Early in 20X8, a calendar-year corporation engages your services to prepare its federal income tax return for
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Question:
- Early in 20X8, a calendar-year corporation engages your services to prepare its federal income tax return for 20X7. It informs you that it was created and capitalized in (hopefully) a §351 transaction employing the only common stock. As you speak with the CFO, you learn the following with respect to the 4 participating shareholders:
Shareholder #1 received 5% of the stock in exchange for certain information in her custody related to the industry in which the corporation would be operating
- Shareholder #2 received 5% of the stock in exchange for his provision of legal organizational services
- Shareholder #3 received 30% of the stock in exchange for raw land; 2/3 of that stock was sold by Shareholder #3 immediately after the attempted § 351 transaction
- Shareholder #4 received 60% of the stock in exchange for cash.
Consider only the §351 requirements of "control" and "property".
Why may §351 treatment be in jeopardy (do NOT analyze the situation here; do so later; here only state the basic concern(s))?
- To resolve this/these concern(s), what questions do you need to ask with respect to:
Shareholder #1
Shareholder #3
Related Book For
South Western Federal Taxation 2016 Corporations Partnerships Estates and Trusts
ISBN: 9781305399884
39th edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young
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