Billy wants to join ABC corporation with Abby and Candy. Abby and Candy each own

Question

Billy wants to join ABC corporation with Abby and Candy. Abby and Candy each own 50% of ABC corporation. The shares in ABC corporation have a total fair market value of $1,000,000. Abby and Candy are willing to give Billy 10% of ABC corporation. Is it possible for Billy not to recognize gain on the transfer to ABC corporation and only receive 10% of the shares?

A. Yes, but Abby and Candy must each contribute property worth $100,000

B. Yes, but Abby and Candy must give up 80% of the company
C. No because Billy will not have control after the transfer
D. Yes, but Abby and Candy must each contribute property worth $50,000

Explanation / Answer

Option - D

Yes but Abby and candy must rach contribute property worth $50000 each

As 10 % of the $ 1000000 without any gain $100000 Billy

In return tje remaining shareholders Abby and Candy contribute $50000 each their share portion

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