1. Formation
• Corp. T consequences
 No G/L to the corporation issuing STK in exchange for property when: formation (issuance of C STK); reacquisition (purchase of T STK); and resale (T STK)
 The basis of property received from the transferor/SH is the greater of adjusted basis (net book V) of the transferor/SH (+ any G recognized by the transferor/SH), or debt assumed by corporation (transferor ma recognize G to prevent a negative basis)
 If the aggregate adjusted basis of property contributed to a Corp. by each transferor/SH in a T-free incorporation > the aggregate FMV of the property transferred, the Corp.’s basis in the property is limited to the aggregate FMV of property.
• SH T consequences
 SH contributing property in exchange for Corp. C STK has no G/L if: the SH immediately own >= 80% of the voting STK and >= 80% of the non-voting STK; and no boot involved (received).
 Following represent boot (taxable) and trigger G recognition: $ withdrawn and receipt of debt security.
 Cancellation of debt (COD): the amount of L assumed that > the adjusted basis of the TA transferred to the corporation is not boot but does generate G: NBV A – (L) = excess L = boot.
 Basis of C STK received from Corp:
 Cash – amount contributed
 Property – adjusted basis (NBV) is reduced by any debt on the property assumed by the corporation, G recognized by SH is + to bring the STK basis to 0
 SH receiving C STK for services rendered must recognize the FMV as ordinary IC. SH who contributes only services is not counted as part of the control group for purpose of the 80%