Matt and Sheila Form Krupp Corporation

question 78

Multiple Choice

Matt and Sheila form Krupp Corporation. Matt contributes property with an FMV of $55,000 and a basis of $35,000. Sheila contributes property with an FMV of $75,000 and a basis of $40,000. Matt sells his stock to Paul shortly after the exchange. The transaction will

• A) qualify with respect to Sheila under Sec. 351 whether Matt qualifies or not.
• B) qualify under Sec. 351 only if an advance ruling has been obtained.
• C) not qualify under Sec. 351.
• D) qualify under Sec. 351 if Matt can show that the sale to Paul was not part of a prearranged plan.

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Definitions:

Homothetic Preferences

A situation in consumer theory where a consumer's preference structure can be represented by a utility function that is proportionally scalable.

Engel Curve

A graphical representation that shows the relationship between income and the demand for a good or service, keeping all other factors constant.

Utility Function

A mathematical representation of how a consumer ranks different baskets of goods according to their level of satisfaction.

High Income

Refers to individuals or households that earn a significantly higher amount of money compared to the average income levels within a specific geographic region or within a particular demographic.