Four individuals form Chickadee Corporation under § 351.Two of these individuals,Jane and Walt,made the following contributions: Both Jane and Walt receive stock in Chickadee Corporation equal to the value of their investments.
A)Jane must recognize income of $40,000; Walt has no income.
B)Neither Jane nor Walt recognize income.
C)Walt must recognize income of $130,000; Jane has no income.
D)Walt must recognize income of $100,000; Jane has no income.
E)None of the above.

Question

Four individuals form Chickadee Corporation under § 351.Two of these individuals,Jane and Walt,made the following contributions:  Both Jane and Walt receive stock in Chickadee Corporation equal to the value of their investments.
A)Jane must recognize income of $40,000; Walt has no income. 
B)Neither Jane nor Walt recognize income. 
C)Walt must recognize income of $130,000; Jane has no income. 
D)Walt must recognize income of $100,000; Jane has no income. 
E)None of the above.

Quizplus · Accepted Answer

Under § 351, when property is transferred to a corporation by one or more persons solely in exchange for stock in the corporation, no gain or loss is recognized by the transferors. Therefore, neither Jane nor Walt recognize any income when they transfer their property to Chickadee Corporation in exchange for stock.

Four Individuals Form Chickadee Corporation Under § 351