Part 1:
On June 3 of current year, Eric, Florence, and George form Wildcat Corporation and transfer the following items:
Transferor Asset Basis to Transferor FMV # of Com Share
Eric Land $200,000 $50,000 500
Florence Equipment 0 25,000 250
George Legal Services 0 25,000 250
Eric purchased the land (a capital asset) 5 years ago for &200,000. Florence purchased the equipment three years ago for $48,000. The equipment has been fully depreciated.
a. Does the transaction meet the requirement of Sec. 351?
b. What are the amount and character of the gains and losses recognized by Eric, Florence, George, and Wildcat?
c. What is each shareholder%u2019s basis in his or her Wildcat stock? When does the holding period for the stock begin?
d. What is Wildcat%u2019s basis in the land, equipment, and services? When does the holding period for each property begin?
Part 2:
Assume the same facts above:
a. Under what circumstances is the tax result beneficial, and for which shareholders?
b. Can you suggest ways to enhance the tax benefit?