Transferring Property

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Transferring Property

Transfers to a Corporation


In this essay, client will be advice regarding the best way to transfer property and perform services to a corporation in exchange for stock with minimal exposure to taxes and risk of an IRS audit. Furthermore, this essay will be discussing rules regarding the transfer of property and services to a corporation in exchange for stock with the review of IRS to determine the level of interest and audits conducted related to this area.


Transfers to Corporation: Transferring Property into Corp in Exchange for Shares

The following are the rules regarding the transfer of property and services to a corporation in exchange for stock:

According to the section 351(a), Non-recognition for shareholder state that there will no consideration given to any gain or loss when property transferred to a corporation via one or more than one person exclusively for stock exchange in such corporation & instantly of this that person/persons are in control of the corporation. In order to fulfill this rule, there are three requirements which are person shall transfer property to the corporation as services are not consider as a property and on this basis person cannot obtain stock in services exchange.

Under rule of 351, it state that if a person obtain stock for services, then that person has to erect cash which should be equal to 10% of the stock value i.e. cash against $100,000 stock would be $10,000. Other requirement is that intention of transfer should be entirely in stock exchange whereas; treatment for any nonqualified preferred stock would be under section 351(g). The last requirement for this rule is that group of transferor or transferors should be in corporation “control” as soon as exchange is done.

A second rule is under section 368(c) which is related to the definition of control. It state that at least 80% of stock possessing ownership should be with transferors group. This section comprises of loss and gain reorganization. Third is related to Treatment of Boot and fourth is related to the Liabilities/Debt Relief where section 357(b) has stated the liability assumptions with respect to debt relief. Last rule is related to Incorporation of a Going Business where section 357(c) has stated on Accounts Receivables and Accounts Payable Tax Benefit Rule and Organizational Expenses (

Method of Transfers

Method Comparable Uncontrolled Price: his method is to compare the prices agreed between the parties relating to the sale of ...
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