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:

Impulse Controls

The ability to resist or delay an impulse, drive, or temptation to act and involves self-regulation skills.

Conditioned Response

A learned response to a previously neutral stimulus that has been repeatedly presented along with an unconditioned stimulus.

Unconditioned Response

A natural, automatic, and innate reaction to a stimulus that occurs without prior learning or conditioning.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with the unconditioned stimulus, eventually comes to trigger a conditioned response.