What are the SEC 351 reporting requirements?
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.
What is the control requirement 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.
What three conditions must be met for a completely tax-free incorporation?
Implicit in this statement of purpose are three general requirements for qualification of a transaction as a tax-free reorganization: 1) the transaction must have a business purpose; 2) the original owners must retain a continued proprietary interest in the reorganized corporation; and 3) in an acquisitive …
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).
How is control defined for purposes of Sec 351 A )?
351(a) “Control” is defined as follows: Transferrers as a group must own at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock.
What are the SEC 351 reporting requirements quizlet?
What are the Sec. 351 reporting requirements? The transferee must attach a statement to its tax return for the year in which the exchange took place, including a description of property, liabilities, and the stock and property transferred in the exchange. Parties included in the Sec.
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 Reorganization?
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.
Is there any depreciation recapture under a Code Sec 351 exchange?
In a Section 351 transfer in which no boot is received and, therefore, no gain is recognized, there is no recapture of depreciation.
What reason prompted Congress to enact section 351 is it to remove this tax barrier to incorporation of an unincorporated business?
Background. Concern about the tax liability that could result from incorporating a currently unincorporated business and the barrier to incorporation it could present, prompted Congress to enact Section 351 to remove this barrier to incorporation of an unincorporated business.
When determining the shareholder basis of stock received for property in a 351 transaction?
351, the transferors obtain basis in the stock of the transferee corporation equal to the basis of all property exchanged: (1) decreased by the fair market value (FMV) of any boot received and the amount of loss recognized on the exchange; and (2) increased by the amount treated as a dividend, if any, and the amount of …
Does section 351 include cash?
Section 351 will apply to A, because both A and B will contribute property (the cash contributed by B is property for purposes of Section 351) to Newco solely in exchange for Newco stock, and they will own stock constituting control of Newco immediately after the transaction.
Does IRC 351 apply to LLC?
Less than 80 percent of the LLC’ assets are readily marketable stocks or securities, or interests in regulated investment companies or real estate investment trusts. Accordingly, LLC is not an investment company under section 351(e)(1).
Is cash treated as property?
Additionally, Cash Is considered property for purposes of Section 351.
Is liability a boot?
The amount of the liability generally is treated as “boot” predominately for determining your basis in the stock received in the exchange. … In applying the asset-by-asset approach you cannot designate specific property to be exchanged for specific stock.
What is boot in a 351?
Generally, boot in a Section 351 transfer is money or property, other than qualified stock of the transferee corporation (that is, stock that a transferor can receive without triggering gain recognition). Boot may be, for example, cash, building, or equipment.
What is a busted 351 transaction?
KEY TAKEAWAY. A busted section 351 transaction is one way to create a taxable event and thereby recognize built-in gain or loss. This can be a beneficial tax-planning tool in certain scenarios, including when tax rates are expected to rise.
When the liabilities assumed by the corporation in a 351 transfer exceed the adjusted basis of the property transferred the taxpayer is going to recognize?
If, as part of a section 351 transaction, a corporation assumes liabilities that exceed the adjusted basis of the transferred properties, section 357(c) generally requires a taxpayer to recognize gain on the transaction. Taxpayers may structure transactions to avoid section 357(c) gain.
What information must a taxpayer gather to determine the amount realized in a property transaction?
What information must a taxpayer gather to determine the amount realized in a property transaction? A taxpayer must determine the cash and fair market value of property received in the exchange.
When a taxpayer transfers property subject to a mortgage?
When a taxpayer transfers property subject to a mortgage to a controlled corporation in an exchange qualifying under § 351, the transferor shareholder’s basis in stock received in the transferee corporation is increased by the amount of the mortgage on the property.
What is corporation’s basis in the transferred property?
According to IRS Publication 551, the company’s basis in the donated property is the smaller amount of either its fair market value or the shareholder’s adjusted basis. Adjusted basis is the original cost of the property plus any improvements, plus any purchase costs, plus any selling costs, minus any depreciation.
Can an S Corp own assets?
An S corporation, C corporation and a limited liability company (LLC) can all buy real estate, and these business entities shield your personal assets from business losses or lawsuits.
Can you contribute property to an S Corp?
Contributions of appreciated property into an S-Corporation are subject to tax when the shareholder owns less than 80% of the corporation’s majority vote, and value after the transfer occurs. When S-Corporations distribute profits to shareholders, and when shareholders sell their stock, taxable events also occur.