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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.
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 treatmentStep by Step Solution
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