Penny, Miesha, and Sabrina transfer property (FMV 150,000, adjusted basis $90,000) to Owl Corporation for 75% of
Question:
Penny, Miesha, and Sabrina transfer property (FMV 150,000, adjusted basis $90,000) to Owl Corporation for 75% of its stock. Nancy, their attorney, receives 25% of the stock in Owl worth $50,000) for legal services rendered in incorporating the business. Penny, Miesha, and Sabrina wish to minimize any tax liability resulting from the transfer.
Penny, Miesha, and Sabrina transfer property (FMV 150,000, adjusted basis $90,000) to Owl Corporation for 75% of its stock. Nancy, their attorney, receives 25% of the stock in Owl worth $50,000) for legal services rendered in incorporating the business. Penny, Miesha, and Sabrina wish to minimize any tax liability resulting from the transfer.
What are the tax consequences for the shareholders (e.g., recognized gain, loss, income) as a result of the transfer?
How should this transaction have been handled? Why?
South Western Federal Taxation 2016 Corporations Partnerships Estates and Trusts
ISBN: 9781305399884
39th edition
Authors: James Boyd, William Hoffman, Raabe, David Maloney, Young