Every transferor and the corporation leave this AC430 Unit 3 formation problem with a stated basis, after control is tested, the excess liability found and the services taxed. Searches like "ac 430 unit 3 assignment example", "ac430 unit 3 sample" and "ac430 unit 3 example" land here.
What a finished AC430 Unit 3 formation problem looks like
A workpaper with a facts block and two ledgers. The facts give each transferor's contribution: Dana's land at a basis of [$120,000] and a value of [$300,000], subject to a [$150,000] mortgage the corporation assumes; Eli's cash; and Farah's design services, valued at [$30,000]. The control test comes next: property transferors hold $300,000 of the $330,000 in stock issued, about 90.9 percent, clearing the 80 percent line in Section 368(c). The shareholder ledger then works each owner. Dana recognizes $30,000 under Section 357(c) because the mortgage exceeds her basis, and her stock basis under Section 358 comes to zero; Eli takes a $150,000 basis; Farah reports $30,000 of compensation. The corporate ledger records the land at $150,000 under Section 362(a) and no gain on issuing stock under Section 1032.
How a AC430 Unit 3 example is structured
Sequence follows the statute's own logic. Qualification comes before any computation, because every later figure depends on whether Section 351 applies at all. The control paragraph explains why Farah's stock counts in the denominator but not the numerator: stock received only for services is not received for property, so her shares cannot help the transferor group reach 80 percent. Each shareholder then gets a short block with gain recognized, the character of that gain and stock basis, with Section 358(d) cited for treating the assumed mortgage as money received. Holding periods follow, tacked for Dana's shares under Section 1223(1), fresh for Farah's. The corporation's block mirrors the shareholders', so the reader can confirm that Dana's recognized gain appears once as income to her and once as added basis in the land.
Who counts toward control
Dana and Eli transferred property; Farah transferred only services, so her [$30,000] of stock sits in the denominator of the 80 percent test and nowhere else.
A mortgage larger than basis
Section 357(c) turns the $30,000 excess of liability over the land's basis into recognized gain, with its character following the land.
Zero basis, shown line by line
Dana's stock basis starts at [$120,000], adds the gain, subtracts the assumed mortgage and lands at zero, each line citing Section 358.
Compensation, not exchange
Farah reports the value of her shares as ordinary income, and the corporation deducts or capitalizes the same amount depending on what the design work produced.
The corporation's side
Land carried at $150,000 under Section 362(a), a tacked holding period, and no gain on issuing stock under Section 1032.
Where marks go in AC430 Unit 3
Grading on this problem usually tracks whether each figure can be traced to the section that produced it. A control test run with Farah counted among the property transferors is the classic slip; on these facts it does not change the outcome, which is why graders read the reasoning rather than the result. Missing the Section 357(c) gain is costlier, because it breaks three later figures at once: Dana's gain, her stock basis and the corporation's basis in the land. Some submissions give Dana a negative basis rather than zero plus recognized gain. Others treat Farah's shares as tax-free because everyone else's were. A corporate basis equal to fair market value, rather than carryover basis plus gain, is marked wrong in most sections. Unstated holding periods and a bare citation to Section 351 for everything cost smaller amounts.
Get a AC430 Unit 3 example written to your instructions
Your Unit 3 facts, whatever template the course provides and the rubric are enough. Qualification is settled before any basis is computed, every transferor gets a block, the corporation's side mirrors them, and the problem returns within 24-48h. The first custom sample is free, and the transferors in it are invented.
AC430 Unit 3 questions, answered
What if the mortgage were smaller than the land's basis?
Then Section 357(a) would keep its assumption from counting as boot, Dana would recognize nothing, and her stock basis would equal her land basis minus the liability. The example includes a two-line note showing that result, because prompts in this unit often vary the mortgage to see whether a student notices where Section 357(c) begins to apply.
Could Farah avoid ordinary income by also contributing property?
Only if the property is more than relatively small in value compared with the stock she receives for services, under the regulations to Section 351, and even then her service shares still produce compensation income. The example mentions this in one sentence and leaves it there, since the facts give her nothing but services. A prompt that adds a token contribution raises a different question.
Does the example show journal entries?
It shows tax basis rather than book entries, since the unit asks for tax consequences. Some sections want both; where a rubric asks for the book side, the land would appear at fair value on the balance sheet while its tax basis stays at $150,000, and that difference becomes a temporary item a later unit reconciles.