What are the relevant tax issues that need to be considered

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Question: David and his son, Spencer have been working together in a fishing store called "The Dry Fly". David formed the business by himself a few years ago as a sole proprietorship and it has always been successful. Spencer has started working there for the last few months working the counter and has started teaching classes in the store on tying flies for trout fishing. Customers love him. Assets in the store currently have a fair market value of $450,000 and a basis of $180.000. On the advice of their tax accountant, David decides to incorporate as The Dry Fly, Inc. He wants Spencer to receive an ownership interest in the business. What are the relevant tax issues that need to be considered? (This question requires you to do a little critical thinking applying the concepts in Chapter 4 we discussed in class)

Reference no: EM133360011

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