Sadie incorporates her sole proprietorship with assets having a fair market value of $80,000 and an adjusted basis of $100,000. Even though Г?5 351 applies, Saddle may recognize her realized loss of $20,000. 2. 3. True False For S 351 purposes, stock warrants are included in the definition of “stock. ” In order to retain the services of Page, a key employee in Boron’s sole proprietorship, Byron contracts with Page to make her a 30% owner. Byron Incorporates the business receiving In return 100% of the stock.
Three days later, Byron transfers 30% of the stock to Page. Ender these circumstances, 351 will apply to the incorporation of Boron’s business. A person who performs services for a corporation in exchange for stock will be 4. Treated as a member of the transferring group even if that person only transfers a relatively small amount of property to the corporation. The corporation. If one of the liabilities is personal in origin, only that liability will be treated as boot. F; personal AND BUSINESS PURPOSES 6. Matthew and Gabrielle form Epsilon Corporation.
Matthew transfers property (basis of $50,000 and fair market value of $40,000) while Gabrielle transfers land basis of $25,000 and fair market value of $30,000) and $10,000 in cash. Each receives 50% of Epsilon Corporation’s stock, which is worth a total of $80,000. As a result of these transfers: D;Matt FM = 40′ paid/boasts= 50, Built loss Gabrielle, FM=30, boasts=25, cash 10 They are giving in, NOTHING is coming back (not even the 10) A. Matthew has no recognized loss, but Gabrielle a recognized gain of $10,000 Epsilon Corporation will have a basis in the land of $30,000 B. C.
Matthew has a recognized loss of $10,000, and Gabrielle has a recognized game of $15,000 D. Neither Matthew nor Gabrielle has any recognized gain or loss. Cadence transfers property worth $500,000, basis of $100,000, to Alpha 7. Corporation for 80% of the stock in Alpha, worth $400,000, and a long-term note, executed by Alpha Corporation and made payable to Cadence, worth $100,000. C; Another 351 (transfer of property), notes payable is a boot! A. C. D. Cadence recognizes a gain of $400,000 on the transfer Cadence recognizes no gain on the transfer Cadence recognizes a gain of $100,000 on the transfer.
Cadence recognizes a gain of $300,000 on the transfer 8. Will transferred land worth $400,000, with a tax basis of $100,000, to Zeta Corporation, an existing entity, for 600 shares of its stock. Zeta Corporation has two other shareholders, Jasper and Joana, each of whom holds 100 shares. With respect to the transfer: A; Potential problems for existing entity under 351 – potential holders! 600 stocks After 351, how many shares are outstanding=800 Will gets 600, is that 80%=no 351 will not work, this is a taxable transaction!
Thus the COST BASIS is recognized as a gain and the stocks too! If 351 worked, C would have been true! Will has a basis of $400,000 in her 600 shares in Zeta Corporation Jasper and Joana both recognize gain on the transfer. Zeta Corporation has a basis of $100,000 in the land Will has no recognized gain 9. Mackenzie incorporates her sole proprietorship, transferring it to newly formed Omega Corporation. The assets transferred have an adjusted basis of $300,000 and a fair market value of $400,000.
