Suppose SPA Corp

question 83

Essay

Suppose SPA Corp. was formed by Sara Inc. (a C corporation that is 100% owned by Sara) and Sara's friend Tyson. In exchange for 50% of the stock of SPA, Sara contributed $100,000. In exchange for the remaining 50% of the SPA stock, Tyson contributed a building with a fair market value of $100,000 and an adjusted tax basis of $60,000. How much gain is Tyson required to recognize on the contribution? Is SPA eligible to elect S corporation status?

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Definitions:

Dominant

Pertains to a trait that is expressed in the phenotype over a recessive trait when both are present in the genotype.

Milgram

Refers to Stanley Milgram, a psychologist known for conducting experiments on obedience to authority figures.

Obedience

The act of following orders or directions from a figure of authority, often without question.

Conducted

The process through which something such as electricity, heat, or sound is transmitted or guided along a path.