In order to retain the services of Bonnie, a key employee in Ralph's sole proprietorship, Ralph contracts with Bonnie to make her a 25% owner. Ralph incorporates the business receiving in return 100% of the stock. Three days later, Ralph transfers 25% of the stock to Bonnie. Under these circumstances, § 351 will not apply to the incorporation of Ralph's business.

Question

Quizplus · Accepted Answer

The transfer of stock to Bonnie is not part of the incorporation transaction and is therefore not covered by § 351.

In Order to Retain the Services of Bonnie, a Key