Corporation Formation

Question 1

Service contribute to company

Answer 1

Ordinary income (taxable): The shareholder receiving common stock for services
rendered must recognize the fair market value as ordinary income. (Note: A shareholder
who contributes only services is not counted as part of the control group for purposes
of the 80 percent control.)

Question 2

no gain or loss if following two conditions met of share holders

Answer 2

1.80% of control
2. no receipt of boot
cash withdraw
excess debt put into corp

Question 3

Basis of common stock

Answer 3

Cash : Amount contributed
Property : adjusted basis (NBV)
Services: FMV ( Taxable ) Ordinary income

Question 4

Detailed Alternative Computation of Basis to Shareholder

Answer 4

Adjusted basis of transferred property (including cash)
\+FMV of services rendered
\+Gain recognized by shareholder
-Cash received
-Liabilities assumed by the corporation
-FMV of nonmoney boot received
=Basis of common stock

Question 5

Corporation Form

Answer 5

Limited Liability Entity taxation Owner

Corporation Y Earning Dividend
LLC Y depend depend
Partnership Limited None earnings
S Corp Y Not generally on earning not generally on distribution
Sole proprietorship No none earnings

Question 6

A tax-free incorporation , what is the percentage for “ Control”

Answer 6

80% control exists if the transfer or/shareholders owns at least 80% of the total voting power and at least 80% of the total # of shares of all other classes of stock

Question 7

In a corporation formation corp basis is

Answer 7

In the transferred assets is the carryover adjusted basis from the shareholders and cash received

Question 8

Own 80+% but received boot

Answer 8

A shareholder who contributes property to a corp in exchange of common stock will not recognize gain or loss if immediately after transaction when the transferring shaeholders own at least 80% of the corp and does not recieve any boot .
However, when boot recieved , owner will then recognize gain to the lesser of

1. cash recieved
2. realized gain

Question 9

which entity has considerable flexibility in choosing an accounting period

Answer 9

C corp