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CORPORATE TAX MID-TERM EXAM

HINT # 2
IN WHAT ORDER SHOULD YOUR WORK PROCEED?
If I were faced with these facts (a proposition as hypothetical as the facts themselves, I suppose),
I would proceed very deliberately and methodically, as follows:
I.

Identify the number of transactions to be analyzed for purposes of determining whether or
not we have a good 351 exchange.

II.

For each of those transactions, identify:

(1) the shareholders who made contributions in that exchange,

(2) their contributions to the corporation (including adjusted basis, fair market values, and
liabilities associated with those contributions), and

(3) the number of shares and other consideration they received from the corporation.

III.

For each transaction you have identified, prepare a separate analysis sheet for each
shareholder who contributed capital in that exchange so you can focus on them individually, listing the items you identified in number II, above. Also, prepare a FMV “Taccount” balance sheet for each shareholder, confirming the value to be ascribed to the
stock received.

IV.

Identify the members of the “control group” (i.e., who contributed the necessary “property” to the corporation in exchange for stock?). Cite authority for your definition of
“property” here and, where an issue exists as to whether any particular shareholder should
be included as a member of the control group, explain why they should be either included
or excluded.

V.

For each transaction you have identified, determine if it constitutes a good 351 exchange,
and think carefully about how you would explain the reasons for your conclusion.

VI.

Go back to your analysis sheet for each contributing shareholder and determine the
amount realized, realized gain or loss, recognized gain or loss, adjusted basis in the stock
and other property they might have received from the corporation, the corporation’s recognized gain or loss on the issuance of stock in exchange for the “property” contributed
(as well as the character of that gain or loss), and the corporation’s adjusted basis in the
“property” received. As you look at this from the corporation’s perspective, consider
carefully the definition of “property.” Determine these items first under the assumption
that we have a good 351 exchange, and then under the assumption that the exchange
does not qualify under Section 351.

VII.

If I were you, I’d save my detailed analysis for shareholder F until last! You might have
to give extra thought to F’s situation.

Based on your work to this point. Edit your work carefully.VIII. and then refer back to your worksheet for each transaction and each shareholder.5341 to discuss it. FINALLY: YOU CAN DO THIS . develop an outline for your memo. you may call me at 218. IX. If you are at an impasse on any particular point after having thought this through.PLEASE DO NOT DISHONOR YOURSELVES BY DISCUSSING ANY ASPECT OF THIS EXAMINATION WITH ANY PERSON OTHER THAN ME. and then work in the details of your analysis and conclusion. AN IMPORTANT REMINDER . Please leave a voice message if you miss me for some reason and I will get back with you.