What is a SEC 351 transaction?

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 items are considered to be property for purposes of Sec 351 A )? What items are not considered to be property?

2-8 What items are not considered to be property for purposes of sec. 351(a)? Property does not include services, an indebtedness of the transferee corporation that is not evidenced by a security, or interest on an indebtedness that accrued on or after the beginning of the transferor’s holding period for the debt.

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.

Does Sec 351 require shareholders to receive stock equal in value to the property transferred?

Does Sec 351 require shareholders to receive stock equal in value to the property transferred? The answer is no; that is, a shareholder is not required to receive stock with value equal the property relinquished under Section 351.

What is boot What does it do to a taxpayer’s basis in their shares?

Boot is money and the fair market value of other property you receive in addition to the stock you receive in an exchange for your property. No loss is recognized when you own more than 50% of the stock.

What is a substituted basis as it relates to stock received in exchange for property in a 351 transaction What is the purpose of attaching a substituted basis to stock received in a 351 transaction?

What is the purpose of attaching a substituted basis to stock received in a §351 transaction? The substituted basis rule preserves the gain or loss deferred in the transfer.

Are stock swaps taxable?

Although a stock swap can be used to exercise NQSOs, there are no benefits to a stock swap over a “cash-less exercise” and there is the potential capital gains tax problem. Shares used to pay the income tax withholding are considered sold and could result in capital gains tax.

What is the basis in a shareholder’s stock after a Code Sec 351 exchange?

Under section 351, the value of the stock obtained for services is recognized as income to the recipient. Under this case, the shareholder’s basis in the stock is the total value of the services offered plus the value basis of the property transferred to the corporation in exchange for its stock.

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.

Is stock treated as property?

Personal property is not permanently attached to land. In most cases, it is moveable and does not last as long as real property. Personal property includes vehicles, farm equipment, jewelry, household goods, stocks, and bonds.

What is the basis in stock in Section 351?

basis in stock of the transferee corporation received by the transferor in a Section 351 transaction generally is the same as the transferor’s basis in the property or properties transferred to the corporation, reduced by (i) the amount of money received as boot, (ii) the amount

How is gain recognized under Section 351 of the tax code?

In the absence of Section 351, a person who transfers property to a corporation in exchange for a corporation’s stock recognizes gain under Section 1001 equal to the difference between the fair market value of the stock received and the adjusted tax basis of the property transferred. Section 351(a) provides an exception to this general rule.

How does section 311 apply to preferred stock?

section 311 shall apply to any transfer in such exchange by the controlled corporation in the same manner as if such transfer were a distribution to which subpart A of part I applies. such nonqualified preferred stock shall be treated as other property for purposes of applying subsection (b).

What does control mean under Section 351 ( a )?

Section 351(a). “Control” means the ownership of stock possessing at least 80% of the total voting power of all classes of voting stock and 80% of the number of shares of each class of nonvoting stock.