[mgoloubenko]

Hey everyone,

REG tomorrow so I’m spending the day doing MCQ’s just to ingrain as much of the material in my brain as I can before my exam. So I am using both Becker & Wiley for the Tax MCQ’s and I am kind of confused. So I kept getting questions wrong in Wiley about a partner contributing property in exchange for stock, the questions regarded the amount of gain recognized by the partner to which I answered $0 as this is a nontaxable transaction since it is the formation. The explanation stated that it was only a nontaxable transaction to the partner IF 80% control was assumed & no boot was involved. Now that I’m re-doing Becker questions, why is no gain recognized despite the contributor not having 80% control? I think you can better understand by seeing the two links I’ve provided.

https://postimage.org/image/t0euk8v45/

https://postimage.org/image/fvzoke4gh/

Also, last minute advice is always appreciated.

FAR 4/9/12- PASSED
BEC 7/13/12- PASSED
AUD 8/16/12- Ughhh 71, Rematch: 90!!!
REG-12/6/12 PASSED

USC MAcc- Fight on!

They say good things come to those who wait, but only those things that are left by those who hustle.

[Anonymous]

Beck and Carr contributed property and recognize no gain because their accumulated control is 90%. Adams only acquired 10% control for his services provided. Since prior to the transaction, there was no control (because there was no corporation) and afterwards, the two individuals transferring property controlled more than 80% of the company, there is no gain recognized.

At least that's how I understood it…

[mgoloubenko]

So what you're saying is that it's not based on an individual receiving 80% control, but rather the individuals who contribute property together now have 80% of control making it a nontaxable event. Is that correct?

FAR 4/9/12- PASSED
BEC 7/13/12- PASSED
AUD 8/16/12- Ughhh 71, Rematch: 90!!!
REG-12/6/12 PASSED

USC MAcc- Fight on!

They say good things come to those who wait, but only those things that are left by those who hustle.

[Anonymous]

I believe that to be the case (I took REG on 11/12/12 and this was one of the issues that was a bit cloudy for me, admittedly). If you look at the first image you posted, in B.1.a. the reference to the transferors/shareholders is I believe the “tell” that you should look not just at an individual shareholder, but the group of shareholders who generated the transaction in this particular question.

[HeyPawl]

I took the test a few weeks ago so maybe I am a little rusty, but yes, you are correct. The guy who provided services would recognize the FMV of services provided as ordinary income. The two others who contributed property recognize no gain because together they represent 80+% of control and voting rights immediatly after the exchange.

AUD - 82 (July)
FAR - 85 (Aug)
BEC - 82 (Oct)
REG - 75 (Nov)
DONE

[forever4]

Yup!

As long as the total percentage of stockholders who do not contribute service is higher than 80%, you do not recognise gain. The one who contrib serv still needs to recog gain at FMV though!

FAR 5/14 88 PASSED!
REG 7/13 74 :((((((((....! I cant believe it!!!! I studied so hard...
REG retake 11/29 -> 89!!!!!!!!!!!!!!!!!!!
BEC 10/11/12 -> 84!!!!!!!!!!!!!
AUD 10/25/12 -> 95!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

I'm DONE! OMG 8 months of hard work.

I SHALL PASS. BECAUSE IT'S ME, SO EVERYTHING WILL BE OK!

[Author]

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