Business Purpose
Property
Control
Miscellaneous
100
If I transfer assets to a corporation to ensure that no gain is recognized at the personal level, will that meet the valid business purpose
No, it must be done for other than tax purposes
100
John promises to mow Corporation X’s lawn in return for 80% of its stock.
Mowing lawns is a service.
100
When must the control test be satisfied?
Immediately following the transaction
100
Which two groups must file documents with the IRS relating to a 351 transaction?
every transferee corporation but only significant transferors
200
Which of the following is not considered a valid business purpose? a) asset protection b) efficient transfer to the next generation c) tax avoidance d) none of the above
Tax Avoidance
200
McDonalds transfers its patented McRib recipe to Denny’s Inc. in return for 80% of its stock.
Patents count as property under 351.
200
What percentage of stock ownership must be met to satisfy the control test?
80%
200
What holding period is used for the stock given to the transferor for capital asset property or section 1231 property?
holding period of the property transferred
300
When forming a corporation what is considered a "best practice" in relationship to the business purpose?
note the business purpose in the 351 exchange at the time of formation
300
The owner of Community BBQ in Decatur, GA transfers his grandfathers age-old Mac ‘n Cheese recipe (there is no written copy of the recipe), to Fox Bros. BBQ in return for 80% of their stock. A. Likely B. Not Likely
It is not likely that the recipe counts as property unless it is ancillary to a patent or trademark.
300
What types of stock must satisfy the control test? a) either voting or all other shares combined b) voting stock c) voting stock and all other shares combined
c) voting stock and all other shares combined
300
3. Section 351 treatment will not be granted to which of the following transactions? a. Transfer to an investment company b. Transfer to a sub-s corporation c. Transfer to a partnership d. Both A & C
d. Both A & C
400
If a corporation operates for a valid business purpose, does that mean the section 351 transaction automatically qualify?
No the transaction itself needs a valid business purpose
400
Snoop Dog transfers 80 pounds of marijuana to Rock-a-Fella Music Records Inc. in return for 80% of their stock. A. Likely B. Not Likely
Illegal income is taxable.
400
4. What is the rationale of implementing a control test for Section 351? a. tax evasion b. If the transferor owns a substantial portion of the corporation his/her interest in the property transferred has not materially changed. c. By restricting 351 transactions, preferential tax treatment is yet again reserved for the 1%
b. If the transferor owns a substantial portion of the corporation his/her interest in the property transferred has not materially changed.
400
The corporations holding period for the property includes that of the transferor. True or False?
True
500
Newt Gingrich decides to upload a video of him asking his third wife for an open marriage on Youtube in return for 80% stock in Mitt Romney’s Bain Capital.
. . . .
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