Tax Researh memo (Corporate Formation and Basis Calculation!) - Research Paper Example

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Tax Researh memo (Corporate Formation and Basis Calculation!)

Fred Horn decides to contribute equipment that has a basis of $100,000 and an FMV of $80,000. Sam Yang will provide his legal services to Acme, Inc., which has an FMV of $20,000, and Wade Kent will use his know-how to develop software that will mass-produce the road runner trap. This software development is worth $75,000 and in addition, Wade Kent will contribute cash worth $100,000. The four shareholders will receive a share of stock as follows: Barry – 140, Fred –150, Sam – 40, and Wade – 350. Each share costs $500. Issue: It was the decision of the four shareholders to come together to form Acme, Inc. However, since each has a personal contribution to the formation of Acme, Inc., there are tax implications involved. Therefore, the issue is that the four shareholders would like to know what tax implications of the formation of Acme, Inc. are to them considering the analysis of their realized and recognized gains/losses. Another issue is the tax implication of the transaction to Acme, Inc., including the basis of the assets the shareholders will include in their books. Authorities: District of Columbia v. Universal Computers Assocs. Code Section 351 Code Section 83 Conclusion: Software is classified as a property. ...Show more

Summary

AC 750 Research File Memo Name: (Tax Research Memo of Acme, Inc. Corporate Formation) Tax File Memo Below is the tax implication to Acme, Inc. Corporate Formation Facts: Barry Brown, Fred Horn, Wade Kent, and Sam Yang decide to form Acme, Inc…
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