Debate the following proposition: All corporate formation transactions should be taxable events.

Select the pro's for this debate. (Select all that apply.)

A. This change eliminates the need for taxpayers to artificially structure transaction to avoid Sec. 351 to recognize gains and/or losses.

B. A corporate formation is a deemed stock purchase; therefore, parties to this stock purchase do not have to recognize gains or losses until they leave the corporation.

C. Making a corporate formation a taxable event decreases tax revenues.

D. Simplification is achieved by eliminating one of the two options - whether a transaction is taxable or not. This change will make administration of the tax laws easier.

Select the con's for this debate. (Select all that apply.)

A. With taxation, corporations will have to raise more capital because transferors of noncash property will have reduced capital to invest and because money must be diverted to pay taxes.

B. Taxpayers are required to recognize losses under the current system, thereby decreasing revenues to the government.

C. With taxation, businesses would be encouraged to incorporate because of the tax benefits that boost economic growth in the U.S.

D. This change would hurt start-up corporations by reducing their capital through the income tax paid by transferors on an asset transfer.