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351 Requirements Introduction: Al, Bob, and Carl form West Corporation and transfer the following items to West:

Sec. 351 Requirements

Introduction:
Al, Bob, and Carl form West Corporation and transfer the following items to West:
Items transferred

Transferor Item Transferor's Basis Fair Market Value (FMV) Shares Received by Transferor
Al Patent –0– $25,000 1,000 common
Bob Cash $25,000 $25,000 250 preferred
Carl Services –0– $7,500 300 common

The common stock has voting rights, while the preferred stock does not.

Task(s):
a. Is the exchange nontaxable under Sec. 351? Explain the tax consequences of the exchange to Al, Bob, Carl, and West.
b. How would your answer to Part a change if Bob had received 200 shares of common stock and 200 shares of preferred stock?
c. How would your answer to Part a change if Carl had contributed $800 cash as well as services worth $6,700?

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