2. You have a client, and they formed a corporation with 5 of their friends. All of the owners (all six of you) were required to put in $50,000 or assets valued at the same into the company, but only 1 of the owners is going to work full time for the company. Under which tax code does this transaction apply and what are the tax effects to the corporation and to the shareholders, who all contribute (for this transaction specifically). (10Pts) 3. Gusto Cars, Inc. has been having a terrible year this year. In the current year, they are scheduled to make only $2.5 million net income, but the heads of the company realize this is primarily due to an accounting change costing them roughly $40 million in income. Sales are going well and the company expects to rebound from this going forward, however, Gusto has held a constant 3.5% payout on its dividend, and without a significant market drop, this means they will have to pay out roughly 7.5 million in dividends. They have an accumulated earnings and profit of $200 million. What will be the tax effect to shareholders assuming the entire dividend is paid out? (10Pts) 4. Assume the same facts above, but the company has no accumulated earnings and profits. Also assume all shareholders have sufficient basis in their stock. (10Pts)