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 corporations 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 corporations adjusted basis in the
property received. As you look at this from the corporations 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, Id save my detailed analysis for shareholder F until last! You might have
to give extra thought to Fs situation.

VIII.
Based on your work to this point, develop an outline for your memo, and then refer back
to your worksheet for each transaction and each shareholder, and then work in the details
of your analysis and conclusion.
IX.

Edit your work carefully.

If you are at an impasse on any particular point after having thought this through, you may
call me at 218.5341 to discuss it. Please leave a voice message if you miss me for some reason and I will get back with you.
AN IMPORTANT REMINDER - PLEASE DO NOT DISHONOR YOURSELVES BY
DISCUSSING ANY ASPECT OF THIS EXAMINATION WITH ANY PERSON OTHER
THAN ME.
FINALLY:
YOU CAN DO THIS