Determining the contributing property, Corporate Finance

1. A contributes property to X, a newly formed corporation, in exchange for 75 shares.  As part of the same transaction, B contributes services to X in exchange for the remaining 25 shares.  Does § 351 apply to the contributions of A and B? Why or why not?

2. A contributes to X, a newly formed corporation, property worth $80 with a basis of $60 in exchange for 20 shares.  Assume the stock is worth $1 per share.  As part of the same transaction, B contributes to X property worth $20 with a basis of $10 in exchange for 80 shares.  How much income must A and B recognize and why (assume that if § 351 applies, A's basis in the stock A receives is the same as A's basis in the property A contributes)?

3.  In each of the following scenarios, determine in regards to the exchange with X:

a)      A's amount realized

b)      A's gain or loss realized

c)      A's gain or loss recognized and the character thereof

d)     A's basis in the X stock received

e)      A's holding period for the X stock received (tacked or not?)

f)       X's basis in the property received

g)      X's holding period for the property received (tacked or not?)

h)      The amount and character of X's gain if X immediately sells the property for $100

      And the following in regards to the subsequent sale from A to B:

i)        A's gain or loss realized

j)        A's gain or loss recognized and the character thereof

k)      A's basis in the remaining shares

l)        B's basis in the purchased shares from A

Assumptions: Except as otherwise stated, A starts out with non-depreciable real property (a capital asset) worth $100 (adjusted basis $40) and ends up with cash of $50 plus a 50% interest (worth $50) in X, a newly organized corporation that owns the property.

(a)    A transfers the property to X in exchange for all of X's stock.  Shortly thereafter, A sells half of his X stock to B for $50.  The stock sale is a "separate" event from the prior incorporation transaction.

(b)   Same as (a), except the stock sale is an integral part of the incorporation plan.

Posted Date: 3/20/2013 5:57:02 AM | Location : United States







Related Discussions:- Determining the contributing property, Assignment Help, Ask Question on Determining the contributing property, Get Answer, Expert's Help, Determining the contributing property Discussions

Write discussion on Determining the contributing property
Your posts are moderated
Related Questions
you buy a car for ths 10000000 to be repaid in 3 years, with annua interest of 12%. preapare a loan amortization table

1. A contributes property to X, a newly formed corporation, in exchange for 75 shares.  As part of the same transaction, B contributes services to X in exchange for the remaining 2

hi how do I contact you by phone

How competitive is the market for banking services? A: With more than 7,000 banks and thrifts in the U.S., banking is one of the most competitive industries in the world. Consi

A owns all of the stock of X.  The stock's basis is $100.  X has a total of current and accumulated earnings and profits of $50.  X distributes $200 cash to A "with respect to his

Many strategic decisions fail because they do not attend to the interests and information held by key stakeholders. This scenario has prompted a stakeholder's approach to cor

Problem: (a) Distinguish between Non-Deposit Taking and Deposit-Taking Institutions. Provide two differences between the two types of institutions. (b) Who regulates Depos

Question: a) Using illustrative and numerical examples, differentiate between speculation and arbitraging in the context of foreign exchange market. b) One year borrowing

Benefits FCF is widely used valuation to estimate enterprise value. It measures the value of free cash flow which organisations generate from daily operating activities. DFCF m

3. Your firm has debt worth $200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of