Ashley, a 70% Shareholder of Wren Corporation, Transfers Property with a Basis

question 56

Essay

Ashley, a 70% shareholder of Wren Corporation, transfers property with a basis of $250,000 and a fair market value of $900,000 to Wren Corporation for additional stock. Ashley owns 78% of Wren after the transfer. Two other shareholders in Wren transfer a nominal amount of property to Wren along with Ashley's transfer so that Ashley and the two shareholders own 90% of the Wren stock after the transfer. Does Ashley have taxable gain on the transfer?

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Definitions:

Preferred Shares

Type of stock that grants holders priority for dividends over common stockholders and rights to assets in the event of liquidation.

Winding Up

The process of dissolving a business by disposing of its assets, paying off creditors, and distributing any remaining assets to shareholders or owners.

Chartered Bank

A financial institution that has been established and operates under a charter granted by the government, offering a range of banking services.

Partnership

A form of business legally organized by multiple individuals who participate in managing the enterprise and dividing its earnings.