Exam 4: Corporations: Organization and Capital Structure

A shareholder contributes land to his wholly owned corporation but receives no stock in return. The corporation has a zero basis in the land.

What are the tax consequences if an individual investor incurs a loss on the following: a. Stock that is not § 1244 stock. b. Stock that is § 1244 stock. c. A corporate bond. d. An uncollectible loan made to a corporation.

Mitchell and Powell form Green Corporation. Mitchell transfers property basis of $105,000 and fair market value of $90,000) while Powell transfers land basis of $8,000 and fair market value of $75,000) and $15,000 of cash. Each receives 50% of Green Corporation's stock total value of $180,000). As a result of these transfers:

One month after Sally incorporates her sole proprietorship, she gives 25% of the stock to her children. Section 351 cannot apply to Sally because she has not satisfied the 80% control requirement.

Wren Corporation a minority shareholder in Lark Corporation) has made loans to Lark Corporation that become worthless in the current year.

Similar to like-kind exchanges, the receipt of "boot" under § 351 can cause loss to be recognized.

The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.

Ira, a calendar year taxpayer, purchases as an investment stock in Redbird Corporation on November 3, 2018. On February 2, 2019, Redbird Corporation is declared bankrupt, and Ira's stock becomes worthless. Presuming § 1244 stock in a small business corporation) does not apply, Ira has a short-term capital loss for 2019.