A finished ACC-669 Topic 2 section 351 transfer analysis example, testing 80 percent control, computing $40,000 of section 357(c) gain and tracing stock and asset basis for three founders. Searches like "acc 669 topic 2 assignment example", "acc669 topic 2 sample" and "acc-669 topic 2 example" land here.
What a finished ACC-669 Topic 2 section 351 transfer analysis looks like
The finished analysis starts from three transfers with illustrative figures. The first founder contributes a building worth $500,000 with a $180,000 adjusted basis and a $220,000 mortgage the corporation assumes, receiving stock worth $280,000. The second contributes $200,000 of cash for stock of equal value. The third receives $40,000 of stock for organizing services. Control is tested under section 368(c): the two property transferors hold $480,000 of the $520,000 of a single class of voting stock, about 92 percent, so section 351 applies to them, while the third founder has $40,000 of ordinary income. Because the mortgage exceeds the building's basis by $40,000, section 357(c) makes that excess gain. The first founder's stock basis under section 358 comes to zero, and the corporation's basis in the building under section 362 is $220,000, the carryover basis plus the gain recognized.
How an ACC-669 Topic 2 example is structured
The analysis is arranged transfer by transfer and then party by party. A contribution table opens it, giving each founder's property, its value, its basis, any liability attached and the stock received. The control section follows, separating stock issued for property from stock issued for services, because only the first counts toward the 80 percent test. Each property transfer is then worked in turn: realized gain, the boot or liability rule that applies, and recognized gain. The liability paragraph checks section 357(b) first, finding a mortgage placed years earlier to buy the building and no avoidance purpose, before applying section 357(c). The services founder gets a short section on ordinary income and cost basis. Basis schedules then carry each shareholder's stock basis and the corporation's asset basis, and a closing note shows the deferred gain now sitting twice, $280,000 in the building and $280,000 in the first founder's shares.
Property stock separated from services stock
The $40,000 of shares issued for organizing work sits outside the transferor group, yet the two property transferors still hold about 92 percent of all stock.
Avoidance purpose ruled out first
Section 357(b) would treat the whole mortgage as boot if its assumption had a tax avoidance purpose, so the analysis clears that question before turning to section 357(c).
Liabilities in excess of basis
The $220,000 mortgage against a $180,000 basis produces $40,000 of gain, recognized even though the founder received no cash from the corporation.
Stock basis reduced to zero
Under section 358 the founder's $180,000 basis falls by the $220,000 of liabilities and rises by the $40,000 of gain, which leaves nothing.
Deferred gain counted at both levels
The building carries $280,000 of built-in gain inside the corporation and the founder's shares carry the same amount, a duplication that later distributions and sales will expose.
Where marks go in ACC-669 Topic 2
Where most versions of this analysis lose credit is the mortgage. Papers that treat the assumed liability as irrelevant because no cash changed hands miss section 357(c) and report no gain, and those that treat the whole $220,000 as boot overstate it by applying section 357(b) with no avoidance purpose in the facts. Counting the services founder's shares toward control reverses the rule, and in closer facts that error decides whether section 351 applies at all. A first founder given a $180,000 stock basis has ignored that liabilities assumed reduce it. The corporation's building basis left at $180,000 drops the gain recognized from the carryover. Papers that stop at the founders never show the corporate side, and an analysis that states conclusions without naming sections 351, 357, 358 and 362 leaves correct figures unsupported.
Get an ACC-669 Topic 2 example written to your instructions
Send the ACC-669 Topic 2 instructions, the rubric and the formation facts in your case. A custom example is written to them, with control tested, liabilities checked under both parts of section 357, recognized gain isolated, and basis carried to each shareholder and to the corporation, returned in 24 to 48 hours. The first is free.
ACC-669 Topic 2 questions, answered
Why does a mortgage in excess of basis create gain?
Because the founder is relieved of a $220,000 debt while having only $180,000 of basis in the property that carried it. Without section 357(c), stock basis would have to go negative to absorb the difference, which the rules do not allow. Taxing the $40,000 excess brings basis to zero instead, and the corporation adds that gain to its basis in the building.
Does stock received for services count toward control?
Not as stock held by a property transferor. Services are not property for section 351, so a founder who contributes only work is outside the transferor group, has ordinary income equal to the stock's value, and takes that amount as basis. The shares still count as outstanding stock when the 80 percent test is measured, which is why the example checks the percentage including them.
Could the founders have avoided the section 357(c) gain?
Possibly, on different facts. Contributing enough additional cash or property to lift the first founder's total basis above the mortgage, or reducing the debt before the transfer, would change the result, and each has costs of its own. The example mentions them as alternatives outside the fact pattern; choosing among them for a real business is work for a qualified adviser.