Does section 351 apply to partnerships?

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.

How is control defined for purposes of Sec 351 A?

How is​ “control” defined for purposes of Sec. ​ 351(a)? A. Control is when the transferors of a company own at least​ 80% of the total combined voting power of the common stock and at least​ 50% of the total number of shares of nonvoting stock.

Under what circumstances will a realized gain and or loss be recognized on a 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).

Does IRC 351 apply to LLCS?

For an LLC taxed as a corporation, the LLC’s basis in the contributed assets is the same as the basis of the member that contributed such property if the contribution was tax free under IRC Section 351.

What financial instruments are not considered stock for purposes of section 351?

Stock warrants and stock rights do not qualify as stock, but are treated as boot, for purposes of Section 351 transfers. Securities received in a Section 351 transfer are also not treated as stock, but as boot. Thus, the receipt of such instruments by the transferor may result in gain recognition under the boot rules.

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.

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 the control requirement of section 351?

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. See Meeting the 80-Percent Control Test for Section 351 Transfers. The Section 351 transfer rules are not elective.

How does 351 affect a new business entity?

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 section 351 include cash?

Not necessarily. Although Section 351 requires that you transfer property to the corporation in return for stock only, this does not mean that the entire exchange will be taxable if you do receive cash or other property (“boot”) in addition to the stock.

Why is a 351 transfer not taxable?

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 Section 351 A elective?

This provision is not elective – it is mandatory. It applies regardless of the taxpayer’s intent, so long as its requirements are satisfied.