Four individuals form Chickadee Corporation under § 351.Two of these individuals,Jane and Walt,made the following contributions: Both Jane and Walt receive stock in Chickadee Corporation equal to the value of their investments.

Question

Four individuals form Chickadee Corporation under § 351.Two of these individuals,Jane and Walt,made the following contributions:  Both Jane and Walt receive stock in Chickadee Corporation equal to the value of their investments.

Quizplus · Accepted Answer

Under § 351, no gain or loss will be recognized on the exchange of property for stock in a corporation if the exchange is solely in exchange for stock in the corporation, and immediately after the exchange, the transferors own at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. In this case, Jane and Walt exchanged property for stock in Chickadee Corporation and both individuals received stock equal to the value of their investments. Therefore, under § 351, neither Jane nor Walt are required to recognize any income.

Four Individuals Form Chickadee Corporation Under § 351