Barry, Dan, and Edith Together Form a New Corporation; Barry

question 120

Multiple Choice

Barry, Dan, and Edith together form a new corporation; Barry and Dan each contribute property in exchange for stock. Within two weeks after the formation, the corporation issues additional stock to Edith in exchange for property. Barry and Dan each hold 10,000 shares and Edith will receive 9,000 shares. Which transactions will qualify for nonrecognition?

• A)Only the first transaction will qualify for nonrecognition.
• B)Only the second transaction will qualify for nonrecognition.
• C)Because of the step transaction doctrine, neither transaction will qualify.
• D)Both transactions will qualify under Sec. 351 if they are part of the same plan of incorporation.

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Definitions:

Strict Liability

A legal doctrine under which a party is held responsible for damages or harm caused by their actions or products, without the need to prove negligence or intent.

Contributory Negligence

Contributory Negligence is a legal defense in tort law where the plaintiff's own negligence played a role in causing the harm and can limit or bar recovery from the defendant.

Assumption of Risk

A legal principle that a person who voluntarily engages in an activity is aware of and accepts the hazards associated with that activity.

Premises Liability

A legal principle that holds property owners and residents liable for accidents and injuries that occur on their property, depending on the legal status of the visitor.