R4. Corporate Formation

Question 1

Formation of C corp

Answer 1

1) corporation tax consequeces
- no taxable gain/loss
- issuance of common stock, purchase of treasury stock, resale of treasury stock

Basis of property corp received
GR. NBV = nontaxable

Greater of
NBV
or debt assumed

……………………………………….
Shareholders tax consequences

• no gain/loss if
  1) 80% control
  2) no receipt of boot
  boots: cash withdrawn
  excess debt put into corporation

Question 2

Formation of C corp

Answer 2

1) corporation tax consequeces
- no taxable gain/loss
- issuance of common stock, purchase of treasury stock, resale of treasury stock

Basis of property corp received
GR. NBV = nontaxable

Greater of
1) NBV
or
2) debt assumed

……………………………………….
Shareholders tax consequences

• no gain/loss if
  1) 80% control ( shareholders putting in cash and property together)
  2) no receipt of boot
  ………………………………………………………..
  **boots:
• cash withdrawn
• excess debt put into the corporation ( in excess of basis)
• boots are taxable

basis for shareholders:
old basis
less: liability
add: recognized gain

Question 3

Shareholders basis of common stock

Answer 3

1) cash: amount contributed

2) property :  
NBV assets 
( liabilities) 
-----------------------
stock received basis 

3) services: FMV - taxable