Posted: January 30th, 2016

John Smith transferred money and property to Corporation X solely in exchange for stock in X. Immediately after the exchange

1. John Smith transferred money and property to Corporation X solely in exchange for stock in X. Immediately after the exchange, John owned 80% of the total combined voting power of all classes of stock entitled to vote and 51% of all other classes of stock. No gain or loss will be recognized by John or X. True or False – explain.
2. If a shareholder of a controlled or solely owned corporation receives no additional shares for a contribution of property to the corporation, the basis of the property received by the corporation is the same as it was to the shareholder. True or False – explain!