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:

Adler

Alfred Adler, an Austrian medical doctor and psychotherapist, known for his theory of individual psychology which emphasizes the importance of the feeling of inferiority and the striving for superiority.

Feelings of Inadequacy

Emotions that reflect a lack of confidence in one's abilities or worth.

Humanistic

A psychological perspective that emphasizes the study of the whole person, looking at human behavior not only through the eyes of the observer but also through the eyes of the person doing the behaving.

Adler

Alfred Adler was an Austrian medical doctor and psychotherapist who founded the school of individual psychology, emphasizing the importance of social context in personality development.