Question: Hillbilly Company is created with the following asset contributions. Bill and Sue are equal owners in this new business venture.
Shareholder Assets Basis Fair Market Value
Bill Cash $100,000 $100,000
Services 50,000 50,000
Sue Land 40,000 150,000*
*The land is subject to a liability in the amount of $50,000 that the Company assumes.
Using the above information write a paper in APA style with references include the information below:
1. Does the above transaction qualify as a Sec. 351 exchange? Show your computations.
2. Compute shareholder basis in the shares received in the exchange.
3. Prepare a tax balance sheet for Hillbilly Company.
4. Are there any benefits to the owners and company if this transaction is considered to fall under Sec. 351?