Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing $215,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $215,000 and a tax basis of $153,750 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownership interest. What amount of gain is each owner required to recognize under each of the following alternative situations? [Hint: Look at IRC §351 and §721.] A. MMT is formed as a C corporation. B. MMT is formed as an S corporation. C. MMT is formed as an LLC.
Mickey, Mickayla, and Taylor are starting a new business (MMT). To get the business started, Mickey is contributing $215,000 for a 40 percent ownership interest, Mickayla is contributing a building with a value of $215,000 and a tax basis of $153,750 for a 40 percent ownership interest, and Taylor is contributing legal services for a 20 percent ownership interest. What amount of gain is each owner required to recognize under each of the following alternative situations? [Hint: Look at IRC §351 and §721.]
A. MMT is formed as a C corporation.
B. MMT is formed as an S corporation.
C. MMT is formed as an LLC.
This question is asking the recognition of gain by partners or investors as they contributed capital in the business in different types of corporations. whether it is a corporation or a limited liability company.
Here only the full gain would recognize as the gain, only if it is contributed for service. but no gain would be recognized if contributed for the property.
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