Maria Has Been Operating a Business as a Sole Proprietorship

question 8

Essay

Maria has been operating a business as a sole proprietorship for several years. She needs additional capital and wants to incorporate her business. The assets of her business (building, land, inventory, and so on)have a $400,000 adjusted basis and a $1.5 million FMV. Maria is willing to exchange the assets for 1,500 shares of Metro Corporation stock, each having a $1,000 FMV. Bill and John are each willing to invest $500,000 in Maria's business and will each receive 500 shares of stock. Why is Sec. 351 important to Maria? Does it matter to Bill and John?

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Definitions:

Presentation Software

A computer application used to create, design, and display slideshows or multimedia presentations.

Personal Computers

Electronic devices that are used by individuals for various tasks such as word processing, internet browsing, and gaming, distinct from larger systems intended for communal use or professional data centers.

Web-Based Tool

An application or software that is accessible over the internet and helps users perform specific tasks online.

Internet Cloud

A metaphor for the global network of remote servers hosted on the Internet to store, manage, and process data, rather than on local servers or personal computers.