A, an individual, is an architect and general contractor. Bis a wealthy individual. Newco's Certificate of Incorporation states that it is authorized to issue 200 shares, no par value of common stock. B transfers S500,000 of cash to Newco in exchange for 50 shares of Newco's stock. A signs a contract with Newco in which A will perform services designing a housing project and then acting as general contractor on the construction of that housing project. In exchange, A will receive 50 shares of Newco's stock. 1b) Suppose instead that A and Newco do not enter into a written contract. A transfers $500 in cash for 50 shares of Newco's stock while B transfers $500,000 for 50 shares of Newco's stock. A then performs the architectural and contracting services for no further charge. Would this change your answer?
A, an individual, is an architect and general contractor. Bis a wealthy individual. Newco's Certificate of Incorporation states that it is authorized to issue 200 shares, no par value of common stock. B transfers S500,000 of cash to Newco in exchange for 50 shares of Newco's stock. A signs a contract with Newco in which A will perform services designing a housing project and then acting as general contractor on the construction of that housing project. In exchange, A will receive 50 shares of Newco's stock. 1b) Suppose instead that A and Newco do not enter into a written contract. A transfers $500 in cash for 50 shares of Newco's stock while B transfers $500,000 for 50 shares of Newco's stock. A then performs the architectural and contracting services for no further charge. Would this change your answer?
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter12: Corporations: Organization, Capital Structure, And Operating Rules
Section: Chapter Questions
Problem 29P
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Transcribed Image Text:A, an individual, is an architect and general contractor. B is a wealthy individual. Newco's Certificate of
Incorporation states that it is authorized to issue 200 shares, no par value of common stock. B transfers
S500,000 of cash to Newco in exchange for 50 shares of Newco's stock. A signs a contract with Newco in
which A will perform services designing a housing project and then acting as general contractor on the
construction of that housing project. In exchange, A will receive 50 shares of Newco's stock.
1b) Suppose instead that A and Newco do not enter into a written contract. A transfers $500 in cash for 50
shares of Newco's stock while B transfers $500,000 for 50 shares of Newco's stock. A then performs the
architectural and contracting services for no further charge. Would this change your answer?
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