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:

Repetitive-motion Injury

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A medical condition caused by the compression of the median nerve as it travels through the wrist at the carpal tunnel, leading to numbness, tingling, and weakness in the hand.

Burnout

The most severe stage of distress, manifesting itself in depression, frustration, and loss of productivity.

Eustress

Positive stress that accompanies achievement and exhilaration.