At a point when Robin Corporation has been in existence for six years, shareholder Ted transfers real estate (with an adjusted basis of $20,000 and fair market value of $100,000) to the corporation for additional stock. At the same time, Peggy, the other shareholder, acquires one share of stock for cash. After the two transfers, the percentages of stock ownership are as follows: 79% is owned by Ted and 21% by Peggy. a. What were the parties trying to accomplish?
At a point when Robin Corporation has been in existence for six years, shareholder Ted transfers real estate (with an adjusted basis of $20,000 and fair market value of $100,000) to the corporation for additional stock. At the same time, Peggy, the other shareholder, acquires one share of stock for cash. After the two transfers, the percentages of stock ownership are as follows: 79% is owned by Ted and 21% by Peggy.
a. What were the parties trying to accomplish?
Ted is attempting to meet the control? requirement of § 351. In order to qualify as a taxable? exchange under § 351, Peggy must join Ted in the transaction. If the requirements are not met, $____ on the transfer will be recognized as a gain? to Ted.
b. Complete the following statement regarding whether this plan will work.
The Regulations provide that stock issued for property whose value is relatively small? compared to the fair market value of the assets? will not be treated as issued in return for property.
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