Show all your calculations.

Cite all references. Assumptions:

Use a flat corporate tax rate of 21% for all problems.

For individuals assume a tax rate of 15% for all dividends and capital gains.

Assume there is no Alternative Minimum Tax for this problem.

Assume that all entities are US domestic corporations, taxed under Subchapter C of the IRC unless otherwise noted. The internal revenue code.

Question 1 On June 1, 2021, Rusty and Grayson formed Thunder Corporation (a new entity). Rusty contributed a patent for new weather prediction equipment in return for a 50% interest in Thunder Corporation. Rusty purchased the patent on March 1, 2018, for 50,000. Grayson contributed manufacturing equipment with a fair market value of 200,000 and a basis of 100,000 in return for a 50% interest in Thunder Corporation. The equipment was secured by loan for 50,000 - which was assumed by Thunder Corporation. Grayson took out the loan on May 20, 2021. He purchased the equipment on January 1, 2017. 1.

A. Does this transaction qualify for non-recognition treatment under IRC Sect. 351? Why or why not? Explain your answer fully.

B. What are the tax consequences to Rusty as a result of this transaction?

C. What are the tax consequences to Grayson as a result of this transaction?

D. What are the tax consequences to Thunder Corporation as a result of this transaction?

E. Would you answer to Parts A and B change if Rusty had developed know-how that he contributed (unpatented) specifically for Thunder Corporation? If so, why? And if so, how?

F. Given the original facts, and ignoring Part E above, would your answer to Part C change if the loan was taken out to purchase the equipment back in 2017? If so, why? And if so, how?