How is control defined for purposes of Section 351 of the IRS code?
Control means ownership of at least 80 percent of all classes of the corporation’s stock and at least 80 percent of the total voting power of all classes of stock.
Under what circumstances will a realized gain and or loss be recognized on a section 351 transfer?
A realized gain is recognized on a § 351 transfer if the transferor receives “boot” in the exchange (i.e., money or property other than stock).
Can a section 351 transaction defer the taxable income if that property is contributed?
Whether you’re setting up a new corporation with just yourself or other people, such as partners in a partnership, or getting involved in an existing corporation, under IRC Section 351(a) you can defer (put off) any resulting tax consequence. You are in CONTROL of the corporation immediately after the exchange.
Which of the following requirements must be met to qualify for a deferral under 351?
In order to qualify for deferral under Section 351, which of the following requirements must be met? acquiring corp transfers its own stock to the target corp shareholders in exchange for the target corp stock. The acquisition and target will merge into a new corp.
What is property for purposes of section 351?
Section 351(a) provides that no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in § 368(c)) of the corporation.
Does 351 apply to S corps?
In the case of a contribution of appreciated property to an S corporation in order to obtain tax deferral, IRC section 351(a) requires that the transferor shareholder, along with all other shareholders making contemporaneous contributions of property, control the corporation immediately after such transfer, and IRC …
What is a 351 transaction?
351 allows a tax-free incorporation transfer if certain requirements are met, including that the property must be transferred to a corporation by one or more persons in exchange for stock in the corporation, and, immediately after the exchange, the transferor(s) is (are) in control (as defined in Sec.
Does section 351 apply to S corps?
Why is a 351 transfer not taxable?
351 is not met ( P1 owns only 50% of Class C instead of at least 80%), P1′ s transfer of property to S1 does not meet the requirements of Sec. 351 and is subject to federal income tax. Because the control requirement is met, the transfer qualifies for tax-free treatment under Sec.
What is considered property under section 351?
Property for purposes of section 351 includes “secret processes and for- mulas,” and any other secret information pertaining to processes in the general nature of a patentable invention, without regard to whether a patent has been applied for or whether the information is patentable.
What is a section 351 transaction?
Sec. 351 allows a tax-free incorporation transfer if certain requirements are met, including that the property must be transferred to a corporation by one or more persons in exchange for stock in the corporation, and, immediately after the exchange, the transferor(s) is (are) in control (as defined in Sec.
Does section 351 include cash?
Additionally, Cash Is considered property for purposes of Section 351. Additionally, Securities are considered property for purposes of IRC §351.
What is a section 351 statement?
“Section 351 has been described as a deliberate attempt by Congress to facilitate the incorporation of ongoing businesses and to eliminate any technical constructions which are economically unsound.”. Hempt Bros., Inc. v. United States, 490 F.2d 1172, 1177 (3d Cir.), cert. denied, 419 U.S. 826 (1974).
What is a 351 statement?
351 Exposure Statement means a written tax analysis, prepared by KPMG , of the amount of U.S. federal income tax liability of each of the Members that would result from the consummation of the Equity Transfer and the receipt of the Per Company Unit Consideration under the terms of this Agreement assuming…
What is Section 351 tax free exchange?
Qualifying For a Tax-Free Exchange Under Section 351(a) Two requirements must be met to qualify for tax-free treatment under Section 351(a): Stock: You get only stock in exchange for your property (not stock plus other property).
Section 351 of the U.S. tax code provides nonrecognition of gain or loss when an individual (s): 1. Transfers property to a corporation 2. Solely in exchange for the corporation’s stock 3. And has control of the corporation immediately afterwards (80% of vote and value) There are several caveats,…