Your clients, Lisa and Matthew, are planning to form Lima Corporation. Lisa will contribute
$50,000 cash to Lima for 50 shares of its stock. Matthew will contribute land having
a $35,000 adjusted basis and a $50,000 FMV for 50 shares of Lima stock. Lima will
borrow additional capital from a bank and then will subdivide and sell the land. Prepare
a memorandum for your tax manager outlining the tax treatment of the corporate formation.
In your memorandum, compare tax and financial accounting for this transaction.
References:
???? IRC Sec. 351
???? Accounting Standards Codification (ASC) 845 (Nonmonetary Transactions), formerly
APB No. 29
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