Billy wants to join ABC corporation with Abby and Candy. Abby and Candy each own
ID: 2431580 • Letter: B
Question
Billy wants to join ABC corporation with Abby and Candy. Abby and Candy each own 50% of ABC corporation. The shares in ABC corporation have a total fair market value of $1,000,000. Abby and Candy are willing to give Billy 10% of ABC corporation. Is it possible for Billy not to recognize gain on the transfer to ABC corporation and only receive 10% of the shares?
A. Yes, but Abby and Candy must each contribute property worth $100,000
B. Yes, but Abby and Candy must give up 80% of the company
C. No because Billy will not have control after the transfer
D. Yes, but Abby and Candy must each contribute property worth $50,000
Explanation / Answer
Option - D
Yes but Abby and candy must rach contribute property worth $50000 each
As 10 % of the $ 1000000 without any gain $100000 Billy
In return tje remaining shareholders Abby and Candy contribute $50000 each their share portion
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