Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hi, please answer the following question. Will give thumb up for your good work, thank you. Aaron, Bob and Cedric plan to organize a C

Hi, please answer the following question. Will give thumb up for your good work, thank you.

image text in transcribed

Aaron, Bob and Cedric plan to organize a C Corporation. They will each contribute cash of $100,000 in exchange each for 100 shares of $1,000 par value common voting stock, a total of 300 shares, which are all the outstanding shares of the C Corporation. a) Apply IRC Sec. 351(a) to this transaction and analyze whether the transaction qualifies for non- recognition treatment. b) What happens if Cedric decides to sell his stock one month later after the C Corporation formation? He needed capital to invest in another venture. This unplanned sale is to an unrelated third party. Will this fail IRC Sec. 351(a)? Please explain your reasoning. Bonus points if you can provide the Revenue Ruling number. c) What happens if Bob, in lieu of his cash contribution of $100,000, offers his personal services instead? Is this taxable to Bob? Will this fail IRC Sec. 351(a) for all three shareholders? Please explain your reasoning. d) How would you restructure the deal if Bob (as in item #c) can only offer his personal services and still have IRC Sec. 351(a) non-recognition treatment? All three are open to suggestion(s) since they badly wished for the IRC Sec. 351(a) non-recognition treatment. Aaron, Bob and Cedric plan to organize a C Corporation. They will each contribute cash of $100,000 in exchange each for 100 shares of $1,000 par value common voting stock, a total of 300 shares, which are all the outstanding shares of the C Corporation. a) Apply IRC Sec. 351(a) to this transaction and analyze whether the transaction qualifies for non- recognition treatment. b) What happens if Cedric decides to sell his stock one month later after the C Corporation formation? He needed capital to invest in another venture. This unplanned sale is to an unrelated third party. Will this fail IRC Sec. 351(a)? Please explain your reasoning. Bonus points if you can provide the Revenue Ruling number. c) What happens if Bob, in lieu of his cash contribution of $100,000, offers his personal services instead? Is this taxable to Bob? Will this fail IRC Sec. 351(a) for all three shareholders? Please explain your reasoning. d) How would you restructure the deal if Bob (as in item #c) can only offer his personal services and still have IRC Sec. 351(a) non-recognition treatment? All three are open to suggestion(s) since they badly wished for the IRC Sec. 351(a) non-recognition treatment

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cash, Corruption And Economic Development

Authors: Vikram Vashisht

1st Edition

1032096888, 9781032096889

More Books

Students also viewed these Accounting questions

Question

=+What can I do to make this press worthy?

Answered: 1 week ago