What is a section 351 transfer?
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.
Does Sec 351 apply to property transfers to an existing corporation?
Yes. Section 351 applies to property transfers to an existing corporation. For the exchange to be tax-free, the transferors must be in control of the corporation immediately after the exchange.
Does IRC 351 apply to S corporations?
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 …
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).
What is the control requirement of 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.
How do you qualify for Section 351?
See Multiple Transferors in a Section 351 Transfer. 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.
What does property include for purposes of 351?
For purposes of section 351, the “control group” is defined in section 368(c) to mean the ownership of at least 80 percent of the total combined voting power of all classes of stock entitled to vote, and at least 80 percent of the total number of shares of all other classes of stock of the corporation. 4.
How do I transfer assets from sole proprietor to corporation?
A sole proprietor has the option of changing the business’s legal structure at any time. You can incorporate the business by filing articles of incorporation with a state business registrar.
How does 351 affect a new business entity?
What are the major eligibility criteria for IRS Section 351 Treatment of property transfers from shareholders to a corporation?
What is a transferee corporation?
Transferee corporation in a combination means the corporation, domestic or foreign, to which the assets are transferred, and “transferor corporation” in a combination means the corporation, domestic or foreign, transferring such assets and to which, or to the shareholders of which, the voting shares of the domestic or …
Does section 351 apply to LLC?
In a section 351 transfer the seller contributes his LLC interests (or the LLC’s assets) to a new corporation, and the buyer contributes stock (or other property) to the new corporation, and if together the seller and the buyer control more than 80% of the new corporation, then the transfer is tax-free.