John, Bonnie and Robin plan to form a corporation. John will contribute inventory property with a $5,000 basis and a $40,000 value in exchange for 40 shares of stock. Bonnie will contribute property with a $45,000 basis and a $39,000 value in exchange for 39 shares of stock. Robin will contribute services to the corporation in exchange for 21 shares of stock and a $20,000 salary. Discuss the possible tax consequences of the above transaction to the corporation and the shareholders. In addition, note what changes you might advise to the transaction to prevent adverse tax consequences to John.
