In Order to Retain the Services of Eve, a Key

question 74

True/False

In order to retain the services of Eve, a key employee in Ted's sole proprietorship, Ted contracts with Eve to make her a 30% owner. Ted incorporates the business, receiving in return 100% of the stock. Three days later, Ted transfers 30% of the stock to Eve. Under these circumstances, § 351 will apply to the incorporation of Ted's business.

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Definitions:

Capital Contribution

Money, property, or other assets contributed to a company or partnership by its owners or partners to support its operations.

Limited Partner

An investor in a limited partnership who is not involved in daily business operations and whose liability is limited to the amount they invested in the partnership.

General Partners

Individuals who participate in the management of a partnership and have unlimited liability for its debts.

Securities Fraud

A type of serious white-collar crime that involves deceiving investors or manipulating financial markets.