Chapter 1 Part 2

Question 1

What is the result of a 351 transaction to the corporation? What happens when the Corp gets property?

Answer 1

A.	contributes money = 0 Gain
B.	contributes inventory = 0 Gain
C.	contributes lands = 0 Gain
D.	contributes equipment = 0 Gain
E.	contributes installment note = 0 Gain

Section 1032 says that no G/L is recognized by a corp on the receipt of money or property or anything else in exchange for its stock. Whenever a corp issues its own stock or anything, it does not recognize gain. 1032 applies there’s no restrictions on it.

Question 2

What is the Corps Basis in the Transferred asset?

Answer 2

Section 362 - the Corp’s basis in the asset is the same as the basis was for the shh who transferred it in. (Limited to FMV)

Question 3

What is the holding period of Transferred assets to the Corp?

Answer 3

Under Section 1223(2) the Corp takes the same holding period that the shh had regardless of the character of the property either in the shh’s hands or in the Corp’s hands. If any TP takes the same basis that the transferor had in property, the TP under Section 1223(2) will also take the same holding period as the transferor.

Question 4

What happens when the corporation assumes the shareholders debt in an exchange?

Answer 4

The rule when there is debt relief is that the shareholder’s basis is reduced by the amount of the debt relief. However cannot go below 0