This year D, E, and F formed a new corporation.D exchanged equipment worth $40,000 for 40 percent of the stock and services worth $15,000 for 15 percent of the stock.E exchanged machinery worth $30,000 for 30 percent of the stock and services worth $10,000 for 10 percent of the stock.F exchanged land worth $5,000 for 5 percent of the stock.Which of the following statements is true?

Question

Quizplus · Accepted Answer

All of the property exchanges meet the requirements for nonrecognition treatment under § 351 because each exchange involves the transfer of property to the corporation in exchange for stock and the transferors collectively own at least 80 percent of the stock. F's transfer also qualifies, as there is no requirement that an equity interest must be of a certain size or percentage to qualify for nonrecognition treatment under § 351. As a result, both options A and B are incorrect.

This Year D, E, and F Formed a New Corporation