This Year D, E, and F Formed a New Corporation

question 13

Multiple Choice

This year D, E, and F formed a new corporation.D exchanged equipment worth $40,000 for 40 percent of the stock and services worth $15,000 for 15 percent of the stock.E exchanged machinery worth $30,000 for 30 percent of the stock and services worth $10,000 for 10 percent of the stock.F exchanged land worth $5,000 for 5 percent of the stock.Which of the following statements is true?

• A)F's transfer does not qualify for nonrecognition treatment under § 351 because he did not receive a sufficient equity interest.
• B)For § 351 purposes, D, E, and F are treated as owning only 75 percent of the stock and therefore their exchanges of property do not qualify for § 351 treatment.
• C)All of the property exchanges qualify for nonrecognition treatment under § 351.
• D)More than one of the above is true.
• E)None of the above is true.

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