uestion One and Two: Apply the Section 351 rules to the following fact situation. Is it or isnt it a Section 351 qualifying transaction? If it is, you must explain why you think so. If you think it doesnt qualify, then you must give a method of fixing it. This is a proposed transaction and your client gives you the following information:

Abbot has owned 100 percent of the corporation for five years. Abbot did a Section 351 when he created the corporation and has a basis of $10,000 with the FMV of the assets before selling 79.5 was about $250,000.

Your client, Costello, is transferring property with a $100,000 basis ($1,000,000 FMV) for 79.5 percent of the company. Abbot has agreed to transfer a piece of equipment that is worth $8,000 and has a basis of zero (he fully depreciated the equipment) to the corporation as a part of the transaction. Abbot doesnt want to do this; he would rather keep the equipment.

for USA rule