Question: Scenario: You are an entry-level CPA at Ernst & Old LLP. You were recently assigned to work on an engagement with three guys who desire

Scenario: You are an entry-level CPA at Ernst & Old LLP. You were recently assigned to work on an engagement with three guys who desire to pool their resources and form an entity to develop and manufacture state-of-the-art wearable biosensors suitable for comfortable, continuous, and noninvasive cardiovascular monitoring. The three organizers believe this entity can go public and be the next great thing.

I am choosing that they form an S-Corporation. Based on that, please answer the question below and cite IRC tax law.

Jan doesn't have much money, but he does have a few existing patents on similar medical devices that he is willing to contribute to the new entity in exchange for stock. Jan worked on these patents for years and has $350,000 invested for patents that have a street value of $750,000. Will Jan's contribution of the patents be a taxable event? Please explain why or why not.

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