In appropriate situations, the IRS may assert:

a. That the Corporation be disregarded as a sham or a nominee

b. That income reported by the Corporation belongs to the shareholder’s personal Form

c. 1040 Schedule C under the assignment of income principles.

d. 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

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 a $500 gross income
_______ b. Corp. X does not report any gross income. 

_______ c. Give Code Section in support of your answer

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) of $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 Corporation’s basis in the property received is $10

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. A’s contribution is tax-free to A

_______ b. B’s contribution is tax-free to B

_______ c. B’s 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 A’s proprietorship. A would recognize an income of $1,000 if B receives her stock in payment for these services.

Which of the following constitutes property for purposes of §351

Money

A debt of Transferee evidenced by a security

A 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

A transfer’s 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 of Stock, Property with FMV of $10,000, and Cash of $10,500.

Show Computations.

A’s realized gain is $ ________________

A’s recognized gain is $ ________________

Give Code Section to Part b. § ________________

A’s the basis in the stock received is $ ________________

Give Code Section to Part d. § ________________

A’s the basis in the property received $ ________________