1. Facts: Abby, Bob, and Cindy form West Corporation and transfer the following items to West:

Transferor	Item	Transferors Basis	FMV	Shares Received by Transferor
Abby	Patent	$0	$25,000	1,000 common
Bob	Cash	$25,000	$25,000	250 preferred
Cindy	Services	$0	$7,500	300 common

The common stock has voting rights. The preferred stock does not.

a. Question: Does the incorporation qualify for non-recognition under 351?

b. Question: What are the tax consequences to Abby, Bob, Cindy, and West?

c. Question: How would your answer to parts (a) and (b) change is Bob instead had received

200 shares of common stock and 200 shares of preferred stock?

2. Facts: On May 1 of the current year, Abby, Bob, Cindy, and Dan form Newco Corporation with the

following investments:

Transferor	Asset	Basis to Transferor	FMV	Common Shares Issued
Abby	Land	$12,000	$30,000	400
	Building	$38,000	$70,000
	Mortgage on land and building	$60,000	$60,000
Bob	Equipment	$25,000	$40,000	300
Cindy	Van	$15,000	$10,000	50
Dan	Accounting Services	$0	$10,000	100

Abby purchased the land and building several years ago for $12,000 and $50,000, respectively. Bob also received a Newco Corporation note for $10,000 due in three years. Bob purchased the equipment three years ago for $50,000. Cindy also receives $5,000 cash. Cindy purchased the van two years ago for $20,000.

a. Question: Does the transaction satisfy the requirements of 351?

b. Question: What are the tax consequences to Abby, Bob, Cindy, Dan, and Newco?

3. Question: On an incorporation of Newco that qualifies under 351, Abby transfers Gainacre

(value = $40,000; basis = $8,000) and Lossacre (value = $10,000; basis = $15,000) in exchange for 4,000 shares of Newco stock (value = $40,000) and $10,000 of cash. What are the tax consequences to Abby and Newco?

4. Facts: Bob owns 80% of X Corporation stock. He transfers a car to X in exchange for additional

X stock worth $5,000 and Xs assumption of his $1,000 car debt and his $2,000 personal loan. The car originally cost Bob $12,000 and, on the transfer date, has a $4,500 adjusted basis and an $8,000 fair market value.

a. Question: What is the amount of Bobs recognized gain or loss?

b. Question: What is Bobs basis in his additional X shares?

c. Question: When does Bobs holding period for the additional shares begin?

d. Question: What basis does X take in the car?