Problem: David Walker and Robert Hudson were best friends and business partners. They paid $500,000 in cash for an old warehouse. Later, they received an appointment as promoters for a new corporation that would manufacture artificial arms. The corporation need a large production facility, and David and Robert sold the warehouse they owned for $800,000 worth of stocks in the new corporation once it was formed.
Later, the corporation was formed and the shareholders discovered just how much David and Robert paid for the facility. How much of the $800,000 in stocks is the new corporation entitled to cancel. Discuss, please.