Peter, Paul and Mary formed a corporation on May 1, 2020.

• Peter contributed inventory with a FMV of $35,000 and an adjusted basis of $50,000 for 35% of the stock in the corporation.
• Paul contributed legal and accounting services with a FMV of $27,000 and $3,000 in cash for 30% of the stock in the corporation.
• Mary contributed an asset with a FMV of $45,000 and an adjusted basis of $40,000 for 35% of the stock in the corporation. In addition, Mary received $10,000 of inventory from the corporation.

Assignment:

Clearly explain to the clients (Peter, Paul and Mary) (professional, complete sentences, good grammar & punctuation) why or why not the above transaction qualifies for 351 treatment. Detail each and every requirement of the general rule, explain where necessary, and discuss the tax impact to each individual client of any variations from the general rule.