You are a partner of a national accounting firm located in Omaha, Nebraska. June James,...
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You are a partner of a national accounting firm located in Omaha, Nebraska. June James, a resident of Omaha, is one of your clients. June calls you with a tax issue.
In an exchange qualifying for Section 351 tax-free treatment, June received 100 shares of the Rickham Corporations stock. In addition, June received a right to receive another 25 shares. The right is contingent on the valuation of a patent contributed by June. Since the patent is pending, the value of the patent value will not be known for several months.
June asks you to explain what her tax consequences will be when she exercises her right and receives the 25 shares. Specifically, she wants to know whether the 25 shares will be considered boot under Section 351 and therefore taxable to her, or whether the shares will be considered additional nontaxable stock.
Research Junes questions and prepare a Tax Research Memorandum detailing your results.
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