Advanced Forensic accounting unit 3 homework help

Advanced Forensic accounting unit 3 homework help -...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Solutions Guide: This is meant as a solutions guide. Please try reworking the questions and reword the answers to essay type parts so as to guarantee that your answer is an original. Do not submit as your own. •Exercise 2-11 (page 2-28) John and Mary each exchange property worth $50,000 for 100 shares of New Corporation stock. Peter exchanges services for 98 shares of New stock and $1,000 in money for two shares of New stock. Are the Sec. 351 requirements met? Explain why or why not. What advice would you give the shareholders? The Sec. 351 requirements are not met because Peter is not considered a transferor of property. Even though he transferred $1,000 of money, this property is of nominal value--less than 10% of the value of the stock he received for services ($49,000). Therefore, only John and Mary are deemed to have transferred property and, since they own only 66-2/3% of the stock of New Corporation, they are not in control. The 10% minimum is specified in Rev. Proc. 77-37 and applies only for advance ruling purposes. The shareholders may choose to engage in the transaction without an advance ruling, report it as nontaxable, and run the risk of being audited, with the result that the IRS treats the transaction as taxable. Alternatively, they might restructure
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/18/2012 for the course HOMEWORK AC420 taught by Professor Atkins during the Spring '11 term at Kaplan University.

Page1 / 2

Advanced Forensic accounting unit 3 homework help -...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online