Please assume for this question that you are an advisor to your Client, and your Client is an individual with a lot of money. On October 1, 2022, your Client has just told you that they have invested in a corporation that holds cryptocurrency. The name of the corporation is XTF. Your Client told you that they contributed $200,000 in cash into the formation of XTF and received 80,000 shares of XTF, making them 80% shareholders of XTF.

Question: Your client wants to know if what is the tax liability that they have in receiving the 80,000 shares of XTF in exchange for the $200,000 that they paid/transferred in exchange for the shares, and they now own 80% of XTF after the transfer. Please discuss the possible tax consequences to your Client.

1^st HINT: Please assume that there are only 2 shareholders of XTF after the corporate formation, and that your Client is 50% owner, and the other shareholder also owns 50%.

2^nd HINT: See class discussion on formation of a corporation under IRC Section 351.