Tax Memorandum B

Questions:

Does the transaction satisfy the nonrecognition rules of Section 351?  Answer each hypothetical separately. (hint: consider whether the steps in transaction disqualify the transaction. Also, the regulations and revenue rulings may help here!)

Hypothetical #1:

T. Swit owns all of the stock of corporation Swit X and operates a second business similar to that of Swit X through a sole proprietorship. Pursuant to an agreement between T. Swit and Alwyn Inc., an unrelated corporation, T. Swit transfers all of the assets of the sole proprietorship to Swit X in exchange for additional shares of Swit X stock. T. Swit then transfers all her Swit X stock to Alwyn Inc. solely in exchange for voting common stock of Alwyn, Inc.

Hypothetical #2:

Parent Corporation owns 80 percent of the stock of a subsidiary, S1. An unrelated corporation owns the remaining 20 percent. Parent transfers assets to S1 solely in exchange for additional shares of S1 stock. As part of the same plan, S1 transfers the same assets to S2, a newly formed corporation of which S1 will be an 80 percent shareholder. An unrelated corporation will own the remaining 20 percent of the S2 stock.

Tax Research Memo
Sample Format
Your Firm
Your Town and State
Date
Relevant Facts
This section should summarize the important facts of the research case. Only
include the relevant facts in a clear and concise manner.
Specific Issues
Identify the issue(s) and state the issue(s) in the form of a question.
Conclusions
Think of your conclusion as the “short” answer to your issue. The conclusion
section is the place to provide tax advice, recommend action(s) for the client to take,
or identify the need for additional information. There may not be a single “best”
alternative to the client’s issue so be sure to consider all applicable alternatives.
Support your conclusion by referencing back to the authority you discussed in the
discussion and analysis section.
Support
This section discusses the issue(s). Begin with the relevant code section(s).
Identify the code section, paraphrase what it says and then discus why it’s
important. Discussion of the relevant Treasury Regulations should follow. Identify the
regulation, paraphrase the important sections, and then address the importance of
the regulation given the facts.
The discussion
should continue by
reviewing relevant Treasury
pronouncements (Revenue Rulings, Revenue Procedures, Letter Rulings, etc.) and
cases. Be sure to include complete cite for each authority. Summarize the important
facts for the pronouncement/case and then compare the facts of the
pronouncement/case to the research facts. Discuss how the facts are similar or
different. Explain how each ruling or case supports or weakens the clients’ position.
Documentation is a very important part communicating tax research and all
statements or opinions should be substantiated with supporting cites. Supporting
cites should be to primary sources only except in rare or unusual situations.