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 …
Is stock considered property under section 351?
The property qualifying for Section 351 exchange treatment must be transferred solely in exchange for the transferee corporation’s stock. Stock for Section 351 purposes includes common or preferred stock, but excludes stock rights, securities and nonqualified preferred stock (NQPS) of the transferee corporation.
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.
Why is a transfer not a closed transaction under Section 351?
In 1997, Congress amended Section 351 to exclude the receipt of nonqualified preferred stock from non-recognition treatment. The rationale of non-recognition treatment under Section 351 is that the transfer of property is not a closed transaction because a transferor has not economically cashed in its position in the transferred property.
Who is a transferor under Section 351 ( D )?
Section 351(d). Although the receipt of stock for services does not fall within Section 351’s non-recognition rule, a person who transfers property for stock as well as receiving stock for services is counted in the group of transferors for purposes of determining whether the transferor
