PROBLEMS
1) A wants to transfer land worth $100 with a $50 basis to X for $100 in value. How much income will A realize and recognize if A receives $100 cash from X and what will be X's basis in the land? Does A's income recognition change if X transfers its own stock to A in the exchange (assume the "general rule" applies)? Will the answer change in the stock case ifA is the sole shareholder of X; conceptually, why should it change?
(2) A contributes property to A', a newly formed corporation, in exchange for 75 shares. As part of the same transaction, B contributes services to X in exchange for 25 shares. Does § 351 apply to the contributions of A and B?
(3) 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 (an employee of A) contributes to A' property worth $20 with a basis of $10 in exchange for 80 shares. How much income must A and B recognize (assume that if § 351 applies, A's basis in the stock A receives is the same as A's basis in the property)?
(4) A owns all 90 shares of Class A voting common stock and all 90 shares of Class C nonvoting common stock of X B owns all 10 shares of Class B voting common stock and all 10 shares of Class D nonvoting common stock ofX. Does A control Xunder § 368(c)? Can Xmake an S election? What if the charter of X is amended so that Class D shares have 1/10 vote per share?
(5) A and X are both accrual-method taxpayers. A owns all the stock of X. A supplied services to X and accrued income therefor (represented by bookkeeping entries of accounts receivable and payable) of $10; X deducted $10. Later, A forgave the account owing in return for stock of X worth $6. How much income or loss must A and X recognize? What would result if X were on the cash method and had not deducted the $10?
(6) A is an inventor who contributes a nonexclusive license to use his new patented invention to his wholly owned corporation X for 100 shares of stock. Does § 351 apply?
(7) A contributes appreciated property worth $80, with an adjusted basis of $60, to newly formed X and in exchange for all of the 80 outstanding shares of X. Immediately thereafter, A gives 20 shares to B, A's employee, in payment of accrued wages. Does § 351(a) apply to A's exchange of property for stock? How much gross income must A and B recognize, if any?
(8) A owns all the stock of X, which is worth $1,000. X wants to acquire land worth $75 (A/B $100) from B. A proposes to transfer $1 of cash to X at the same time B transfers the land to X for stock. Will B recognize loss on the transfer of the depreciated land?
Textbook - Federal Income Taxation of corporations and shareholders Seventh Edition by Boris Bittker and James S. Eustice