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.
???? IRC Sec. 351
???? Accounting Standards Codification (ASC) 845 (Nonmonetary Transactions), formerly
APB No. 29