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:

Anomic Suicide

A concept in sociology referring to a condition of disillusionment and disorientation typically due to a sudden breakdown in social norms and values.

Introjective Suicide

A type of suicide resulting from the internalization of negative feelings and self-directed anger, associated with feelings of failure or guilt.

Dichotomous Thinking

A cognitive distortion involving viewing situations, people, or self-evaluations in terms of extreme black-and-white categories, without recognizing any middle ground.

Thanatos

In psychoanalytic theory, it refers to the death drive, which is a concept suggesting humans hold an unconscious wish to die or self-destruct.