Organization and Capital Structure
ORGANIZATION AND CAPITAL STRUCTURE
In a § 351 transfer, a shareholder receives boot of $15,000 but ends up with a realized
loss of $6,000. Only $6,000 of the boot will be taxed to the shareholder.
When a taxpayer transfers property subject to a mortgage to a controlled corporation in
an exchange qualifying under § 351, the transferor shareholder’s basis in stock received
in the transferee corporation is increased by the amount of the mortgage on the property.
Basis of property transferred minus boot received (including liabilities transferred) plus
gain recognized equals basis of stock received in a § 351 transfer.
In return for legal services rendered incident to its formation, Sienna Corporation issues
stock to Penelope, an attorney.
Sienna cannot deduct the value of this stock as a business
When depreciable property is transferred to a controlled corporation under § 351, any
depreciation recapture carries over to the corporation.
Gloria owns 100% of the stock of Mango Corporation.
In the current year Gloria
transfers an installment obligation, tax basis of $30,000 and fair market value of $70,000,
for additional stock in Mango worth $70,000.
Gloria recognizes no taxable gain on the transfer.
Gloria has a taxable gain of $40,000.
Gloria has a taxable gain of $70,000.
Gloria has a basis of $70,000 in the additional stock she received in Mango
None of the above.
Jerrod and Katrina form Slate Corporation.
Jerrod transfers property (basis of $140,000
and fair market value of $100,000) while Katrina transfers land (basis of $50,000 and
fair market value of $80,000) and $20,000 of cash.
Each receives 50% of Slate’s stock.
As a result of these transfers:
Jerrod has a recognized loss of $40,000, and Katrina has a recognized gain of
Neither Jerrod nor Katrina has any recognized gain or loss.
Jerrod has no recognized loss, but Katrina has a recognized gain of $30,000.