Introduction:
Al, Bob, and Carl form West Corporation and transfer the following items to West:
Items transferred
| Transferor | Item | Transferor’s Basis | Fair Market Value (FMV) | Shares Received by Transferor |
| Al | Patent | ‘0’ | $25,000 | 1,000 common |
| Bob | Cash | $25,000 | $25,000 | 250 preferred |
| Carl | Services | ‘0’ | $7,500 | 300 common |
The common stock has voting rights, while the preferred stock does not.
Task(s):
a. Is the exchange nontaxable under Sec. 351? Explain the tax consequences of the exchange to Al, Bob, Carl, and West.
b. How would your answer to Part a change if Bob had received 200 shares of common stock and 200 shares of preferred stock?
c. How would your answer to Part a change if Carl had contributed $800 cash as well as services worth $6,700?
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