Section 351 Exchange

General rule under section 351 a no gain or loss shall be recognized if 1 property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and 2 immediately after the exchange such person or persons are in control of the corporation as defined in irc section 368 c.

Section 351 exchange. Section 351 of the internal revenue code irc permits a tax free incorporation transfer where specific requirements are met. In determining control for purposes of this section the fact that any corporate transferor distributes part or all of the stock which it receives in the exchange to its shareholders shall not be taken into account. Prior to amendment text read as follows.

These requirements include that the property has to be transferred to a corporation by one or more people in exchange of shares of the corporation. Section 351 a provides that no gain or loss shall be recognized if property is transferred to a corporation by one or more persons. 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.

Generally transferring property into a corporation in exchange for its stock is a taxable event. Not stock plus other property. Under section 351 a no gain or loss is recognized by a transferor of property to a corporation in exchange solely for common stock and certain types of preferred stock if the transferors are in control of the transferee corporation within the meaning of section 368 c immediately after the transfer.

Many practitioners think of section 351 1 which applies to transfers of property to entities taxable as corporations and section 721 which applies to transfers of property to entities taxable as partnerships as more or less identical provisions that produce substantially similar federal income tax consequences. 1 you get only stock in exchange for your property. 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.

368 c of the corporation. 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.