In short
Section 351 allows property to be transferred to a corporation in exchange for its stock without recognizing gain or loss, if the transferors control at least 80% of the corporation immediately after the exchange.
Key takeaways
- Gain is recognized to the extent of boot received, or if liabilities assumed exceed the basis of the property transferred.
- Services are not property, so stock received for services is taxable.
- The shareholder's stock basis is the basis of the property transferred, adjusted for boot and gain.
Where it's tested
TCP: Entity Choice & Structuring — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Several individuals transfer property to a newly formed corporation in exchange for all of its stock. Under Section 351, the transfer is generally tax-free if: