Chapter 13 - Corporation Formation

Question 1

What is Section 351?

Answer 1

no gain or loss will be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock (including treasury stock) in the corporation. This occurs immediately after the exchange of person(s) control the corporation. Mandatory.

Question 2

Nonqualified Preferred Stock

Answer 2

is treated as boot received

isn’t counted as stock toward the 80% ownership test. Generally, non-qualified preferred stock has any of the following characteristics ( see card )

Question 3

What are nonqualified preferred stock characteristics ?

Answer 3

1) Holder has the right to require the issuer or a related person to redeem or buy the stock

2) The issuer or a related person is required to redeem or buy the stock

3) The issuer or a related person has the right to redeem or buy the stock and , on the issue date, it is more likely than not that the right will be exercised.

4) The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices.