Elijah Pitts operates a simple but profitable business as a proprietorship. Given the level of profits he is attaining, he would like to incorporate. The latest balance sheet of his proprietorship follows.

He advises you that the current value of the office equipment is $12,000, that he fully expects to collect all of the receivables, and that the value of the goodwill is $20,000. If he does incorporate, he prefers to minimize any tax liability that incorporation might bring.
REQUIRED
Design and detail what you believe to be the optimum style of the transfer, including any section 85 rollover. Indicate the tax values of the assets owned by the corporation.

Elijah Pitts Enterprises Balance Sheet (condensed version) (Tax value basis) December 31, 2008 Assets Cash Accounts receivable (trade) Office equipment (UCC) $5,000 15,000 10.000 $30.000 Liabilities Bank loan (operating) Accounts payable $4,000 5,000 9,000 $21.000 $30,000 Proprietorship Equity