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Dan, a lawyer, owns a real estate company with a basis of $10,000 and a fair market value of

Question

4) Dan, a lawyer, owns a real estate company with a basis of $10,000 and a fair market value of

$18,000. Elite has outstanding 100 shares, all held by Mr. Able. Elite issues 400 additional shares of its common stock (having fair market value of $18,000) to dan in exchange for his property worth $18,000.

A. Dan does not qualify for IRC 351 treatment because he has transferred his property to elite in a separate and distinct transaction from Mr. Able

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B. Dan qualifies for section 351 treatment because he acquired “control” of Elite and Mr. Able must file an amendment returns covering his previous transfers to elite due to his loss of control.

C. The gain realized on the transfer is recognized in full by Dan because he occasionally renders legal services to Elite.

D. The transfer is not taxable to Dan or Elite due to the application of Section 351 and 1032.

How much gain, if any, would Dan have recognized if he transferred the real estate to Elite subject to an existing indebtedness of $14,000 and what adjusted basis would have resulted in question

 
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