QUESTION #2

Jack transfers equipment with FMV: $550,000; AB: $100,000 in exchange for 50% of the 10,000 shares of common stock of UTH. UTH gives him $50,000 cash.

Jill transfers accounting services w/ FMV of $100,000 and equipment with FMV: $300,000; AB: $150,000; and cash of $150,000 in exchange for 50% of the 10,000 shares of common stock of UTH. UTH gives her a painting with FMV of $50,000 and AB of $10,000.

1. Is this transaction a qualified Sec. 351? Why?
2. How does Jack report this transaction?
3. What is his basis in his UTH stock?
4. How does Jill report this transaction?
5. What is her basis in her UTH stock?
6. What is UTHs basis in Jacks equipment?
7. What is UTHs basis in Jills equipment?