Maria Has Been Operating a Business as a Sole Proprietorship

question 8

Essay

Maria has been operating a business as a sole proprietorship for several years. She needs additional capital and wants to incorporate her business. The assets of her business (building, land, inventory, and so on)have a $400,000 adjusted basis and a $1.5 million FMV. Maria is willing to exchange the assets for 1,500 shares of Metro Corporation stock, each having a $1,000 FMV. Bill and John are each willing to invest $500,000 in Maria's business and will each receive 500 shares of stock. Why is Sec. 351 important to Maria? Does it matter to Bill and John?

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Definitions:

Scabies

A contagious skin infestation caused by the mite Sarcoptes scabiei, characterized by intense itching and a rash.

Basal Cell Carcinoma

A type of skin cancer originating in the basal cells, which are located in the deepest layer of the epidermis, and is characterized by its slow growth.

Alopecia

The clinical term for baldness.

Melanoma

A form of skin cancer originating in the melanocytes, the cells responsible for pigment production.