Code Sec. 351 only applies to the organization of a corporation, not to transfers to an already...

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Code Sec. 351 only applies to the organization of a corporation, not to transfers to an already existing corporation. ______ 2. Individual A, an accountant, receives 50 shares of stock for services in connection with the organization of X corporation. Individual A has ordinary income to the extent of fair market value of the 50 shares. ______ 3. Corporate distributions are dividends only if there are sufficient current earnings and profits. ______ 4.
	
Document Preview: Part I (One point each)Indicate whether each statement is true or false.______		1.	Code Sec. 351 only applies to the organization of a corporation, not to transfers to an already 			existing corporation.______		2.	Individual A, an accountant, receives 50 shares of stock for services in connection with the 		organization of X corporation.  Individual A has ordinary income to the extent of fair market 			value of the 50 shares.			______		3.	Corporate distributions are dividends only if there are sufficient current earnings and profits. 		______		4.	A shareholder’s basis in property distributed from a corporation is the basis of the corporation in  XXXXXXXXXXsuch property. 			______		5.	A distributing corporation may be required to recognize gain on the distribution of property to a     			shareholder.______		6.	The dividend received deduction allowed to a corporation owning 20% of another corporation is 			70%.                        ______ 	7.	All organizational expenses must be amortized ratably over the 180 month period beginning with 			the month the corporation begins business.______	   8.	The charitable contribution deduction for a corporation is limited to 10% of taxable income after            XXXXXXXXXXthe DRD and any net operating loss carryback.______	 9.	A corporation deducts capital losses for the current year against its capital gains and any			excess is deductible up to $3,000.______	10.	The assumption of a liability by the corporation in a Section 351 transaction is not considered            XXXXXXXXXXboot.______	 11.	The repayment of the face amount of a debt instrument is nontaxable to the holder of the debt.______	 12.	Dividend distributions by a corporation to its shareholders are deductible to the corporation to 			the extent of its earnings and profits.______	13.	Pursuant to Section 166, an ordinary loss deduction is allowed to non-corporate lenders for				 non-business bad debts....

David · Accepted Answer

Part I 
___ 1. False. 
May also apply to the transfer to an existing company , controlled by the transferor. 
___ 2. True. 
___ 3. False. 
Both current as well as accumulated earnings and profits. 
___ 4. False. 
Basis is the FMV. 
___ 5. True. 
___ 6. False. 
80%. 
___ 7. True. 
Instead of all, it should be remainder of $5,000 reduced by the amount by which the start ups 
expenditure exceed $50,000 or the amount of start up expenditures, whichever is lower. 
___ 8. False. 
___ 9. False. 
Any excess is not deductible. 
___ 10. False. 
___ 11. True. 
___ 12. False. 
___ 13. False. 
Treated as loss on short-term capital asset. 
___ 14. True. 
___ 15. False. 
___ 16. False. 
___ 17. True. 
___ 18. False. 
Only individuals, estates, certain exempt organisations, or certain trusts. 
___ 19. False. 
___ 20. True. 
Separate loan basis.
Part II
1. c. $10,000 gain 
Reason: Excess of worth of stock over cash and basis of the equipment. 
2. d. $40,000 
Reason: Stock worth $70,000 paid to A less cash received, $30,000. 
3. b. $10,000 gain 
Reason: Excess of worth of stock received over net of basis of land and liabilities assumed by 
Deli Corporation. 
4. b. $30,000 
Reason: Value of stock given. 
5. c. $5,000 gain 
Reason: Selling price received of $40,000 worth of stock plus $5,000 of cash plus $5,000 of 
property less basis of $45,000. 
6. b. $40,000 
Reason: Provided building worth and having value $50,000 for stock of $40,000 plus cash 
$5,000 and property $5,000. 
7. d. $50,000 
Reason: Cost of building in the form of stock of $40,000 plus cash $5,000 plus property 
$5,000. 
8. c. $6,000 
Reason: Income of $6,000 received in the form of stock in exchange for personal services 
provided. 
9. c. $6,000 
Reason: Basis equals the cost of acquiring stock which is amount of personal services 
rendered. 
10. b. $5,000 
Reason: IRC Sec 195(b), Sec 248 and Sec 709. 
11. b. No 
Reason: Code Sec. 351 provides for non-recognition of gain or loss in case of a transfer of a 
property to a corporation by one or more persons where such transfer is made solely in 
exchange for stock in the corporation and immediately after such transfer, the person become 
in control of the corporation. 
12. c. $50,000 
Reason: FMV of land. 
13. Seems to be some mistake in the question. 
Distribution of cash to the extent of the corporation’s earnings and profits is to be treated as 
dividend. Over it,

Code Sec. 351 only applies to the organization of a corporation, not to transfers to an already existing corporation. ______ 2. Individual A, an accountant, receives 50 shares of stock for services in...

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