Research Problem 1 and 3 (Chapter 4)

Research Problem 1 and 3 (Chapter 4) - Research Problems...

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Research Problems Research Problem 1 CPAs 3140 Chaminade Boulevard Honolulu, HI 96816 January 24, 2011 Lynn Jones 1540 Maxwell Avenue Highland, KY 41099 Dear Ms. Jones: This letter is in response to your question with respect to whether or not you would have gain on the transfer of your substantially appreciated shares in Brown Corporation if you transfer the shares to a newly formed corporation. In addition, whether there will be tax consequences if you, Shawn, Walt, and Donna form a partnership, rather than a corporation. Our conclusion is based upon the facts as outlined in your January 23, 2011 letter. Any change in facts may cause our conclusion to be inaccurate. § 351 provides that gain or loss is not recognized upon the transfer of property to a corporation when certain conditions are met. In addition, Section 351 mandates that a controlled corporation will not recognize gain if it transfers only stock to a shareholder in return for property. Therefore, you will not recognize gain on the transfer of your substantially appreciated shares. Only if the shareholder is given appreciated property as boot, the corporation may recognize gain (but not loss). A boot is something received by the transferor/taxpayer in the exchange which is not like-kind to relinquish the property. If the transferor transfers his or her property in exchange for stock and with no boot attached, the transferor/taxpayer is
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Research Problem 1 and 3 (Chapter 4) - Research Problems...

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