Phil and Nick Form Philnick Corporation

question 75

Essay

Phil and Nick form Philnick Corporation. Phil exchanges cash and other property for 900 shares (90% of the outstanding shares)of Philnick stock. Nick performs accounting services in exchange for 100 shares of Philnick stock worth $10,000. What are the tax consequences from forming the Philnick Corporation to Phil and Nick?

---

Definitions:

Photosynthetic Bacteria

Bacteria capable of photosynthesis, a process that converts light energy into chemical energy, thereby producing oxygen as a by-product, crucial for earth's oxygen supply.

Chemosynthetic Bacteria

Microorganisms that obtain energy by converting inorganic molecules to organic matter, independent of sunlight.

Autotrophs

Organisms that produce their own food from inorganic substances, like carbon dioxide and water, typically through photosynthesis.

Heterotrophs

Organisms that obtain energy by consuming other living things, unable to synthesize their own food.