Question

Part 1:

On June 3 of current year, Eric, Florence, and George formWildcat Corporation and transfer the following items:

Transferor Asset Basis to Transferor FMV # of Com Share

Eric Land $200,000 $50,000 500

Florence Equipment -0- 25,000 250

George Legal Services -0- 25,000 250

Eric purchased the land (a capital asset) 5 years ago for&200,000. Florence purchased the equipment three years ago for$48,000. The equipment has been fully depreciated.

a. Does the transaction meet the requirement of Sec. 351?

b. What are the amount and character of the gains and lossesrecognized by Eric, Florence, George, and Wildcat?

c. What is each shareholder%u2019s basis in his or her Wildcatstock? When does the holding period for the stock begin?

d. What is Wildcat%u2019s basis in the land, equipment, andservices? When does the holding period for each property begin?

Part 2:

Assume the same facts above:

a. Under what circumstances is the tax result beneficial, andfor which shareholders?

b. Can you suggest ways to enhance the tax benefit?