Facts for 10 and 11. Bill owns 1000 share of stock in BBB Corporation. John woul
ID: 2584283 • Letter: F
Question
Facts for 10 and 11. Bill owns 1000 share of stock in BBB Corporation. John would like to contribute property with an adjusted basis of $10,000 and a fair market value of $50,000 in exchange for stock in BBB. John will also provide services to BBB with a fair market value of $30,000. John will receive shares of stock from BBB. John would like the transfers to meet the requirements for nonrecognition under section 351. Read relevant provisions of IRC Section 351. Read Reg. Sec. 1.351-1 (a) (2), Examples 2 and 3. 10. What amount of income, if any, must John recognize if the transaction meets the nonrecognition requirements of section 351? 11. What is the least number of shares that BBB must issue to John to accomplish his goal of nonrecognition? shares. Why?Explanation / Answer
Requirements for sec 351
Property transferred for income will be treated as ordinary income for services renderes to corporation
in this case it will be $30000
The limit of 80% should be met for non recognition, assuming total shares are 1000 as held by bill, corporation must issue more than 4000 shares.
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