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Forming a corporation

SEE 2 Chapter 6 · IRS outline 1D1, 1D2, 1D3, 1D4, 1D5, 1D6

Daniel Okafor is ready. Okafor Plumbing will become a corporation, and he plans to transfer his van, tools and receivables for stock. His sister Ngozi will put in cash. His business adviser Sam will take some shares for setting it all up. Meanwhile Walt Brandt has a question about his second company and whether the IRS sees two businesses or one. Nadia draws one diagram for each case. By the end, Theo can explain why one transfer costs nothing and another produces a surprise tax bill.

In this chapter

1. Section 351: forming a corporation without tax
2. Services for stock
3. Boot: money or property with the stock
4. Property subject to debt
5. Organization costs and what each party gets
6. Controlled groups
7. Closely held corporations

This chapter has 7 lessons and 52 practice MCQs with explanations, plus flashcards and a recall sheet.

What this chapter covers

• Section 351 and the 80% control test
• services for stock
• boot
• liabilities under section 357
• controlled groups
• closely held and personal holding companies

Chapter 5: Partnership distributions, exits, filing and audits · Chapter 7: The C corporation return