QUESTION 5

1. C and D jointly organized Z corporation. C transfers property to Z in exchange for $500 in cash and 45 shares of Zs stock. D transfers $500 in cash to Z in exchange for 45 shares of Zs stock. Z also issues 5 shares of its stock to lawyer in payment of lawyers bill for legal services in organizing Z.

   	a.	This is a good 351 transaction since property transferors do have control immediately afterwards. Lawyer has received shares for services.
   	b.	This is not a good 351 transaction because the property transferors do not control 80% of the shares since A only receives 45 shares.
   	c.	This transfer does not qualify for non-recognition under 351.
   	d.	None of the above.

QUESTION 6

1. C and D jointly organize Z Corporation. C transfers properties to Z in exchange for $150 cash and half of Zs stock. D transfers $150 in cash to Z in exchange for the other half of the stock. Cs property consists of two parcels, parcel 1 with a basis of $120 and a value of $240 and parcel 2 with a basis of $90 and a value of $60.

   	a.	C has a gain of $120 on parcel 1 which is recognized and a loss of $30 on parcel 2 which is not recognized. C has a basis of $180 in all of the stock based on a basis of $210 in the property transferred in plus $120 in gain realized less $150 in cash received.
   	b.	Under 351 C has a net gain of $90 on the transfer of the two parcels and must recognize that amount of gain because of the $150 cash boot.
   	c.	Cs basis in its stock received is the basis of $210 plus $150 gain realized minus $150 cash received or $210.
   	d.	None of the above.

QUESTION 7

1. C and D jointly organized Z Corporation. C transfers his property to Z in exchange for a $200 five-year note (which is a debt not equity) and half of Zs stock. D transfers $200 in cash to Z in exchange for the other half of Zs stock.

   	a.	351 covers the transfers. There is no gain or loss to recognize.
   	b.	C must recognize gain on the property to the extent of amount realized minus basis because 351 does not cover the transaction.
   	c.	351 Covers the transaction; however, 351(b) requires C to recognize gain on the property to the extent of the boot received which is the $200 note.
   	d.	C may report this gain on the $200 note on the installment basis under section 453.
   	e.	c and d.

QUESTION 8

1. C borrows $250 from bank on a non-recourse loan with property as security. C then transfers the property to Z Corporation, subject to the debt, in exchange for half of Zs stock, and, as part of the same transaction, D transfers $250 in cash to Z in exchange for the other half of Zs stock. Assume the property has a fair market value of $500 prior to the borrowing and a basis of $200. Assume also that the borrowing does not have a tax avoidance purpose under 357(b).

   	a.	The transaction does not qualify under Section 351.
   	b.	The transaction qualifies under Section 351. There is no gain or loss to recognize since no boot is received.
   	c.	Boot is received equal to the amount of the liability of $250 so that gain must be recognized to that extent.
   	d.	Boot is received to the extent of $50, the excess of the liability over the basis of the property. Gain must be recognized to that extent.
   	e.	None of the above.