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20 Cards in this Set
- Front
- Back
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3 Requirements for 351
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exchange of property, in return for stock, control is met after exchange
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Control Requirements
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80% voting power of all classes of stock AND 80% of all other classes of stock
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Donation of services
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does not count toward the 80% control requirement.
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Exception to donation of services. When can it count toward 80%?
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if FMV of stock for property be at least 10% of stock received for services.
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80 and two 10s rules
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grouped contributors must provide at least 80% and service providers must give property valued at at least 10% of services and prior owners must provide at least 10% in of the value they already to own.
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Timing of Contributions?
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No need to be on the same day, just part of the same transaction. So could be a few months apart
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Control after requirement
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Must maintain control immediately after? no definition for it.
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Boot is?
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Anything received from the Co. other than stock. (property or cash etc)
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How to recognize boot?
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Lessor of FMV or Recognized Gain
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Separate Properties Approach for 351?
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Use a weighted Average to proportionally distribute value received and boot.
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Transferors basis in stock formula?
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Adjusted basis of given
+gain recognized (not realized) - FMV of Boot and Liabilities assumed by corp |
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Calculate the Transferor's basis in stock formula.
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Adjusted Basis
+Gain Recognized (not realized) - Liabilities assumed or Boot |
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Impact to transferor when Co. assumes liabilities?
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Add liability to value received for figuring gain. Subtract from basis for determining basis.
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Bona Fide Business Purpose?
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Liabilities considered boot if principal purpose of transfer of any portion of liabilities is tax avoidance.
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Liability > Basis tax consequences.
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excess liability is taxed as a gain regardless if a gain or loss is realized. Gain = Liability - (basis of all property combined)
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Transferee Corp gain or loss recognized?
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No gain or loss recognized when issuing own stock in exchange for property or services regardless of 351 or not. Unless it is appreciated property. then treated as though it had been sold.
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Transferee Corporation Basis?
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Adjusted basis in property received
+ Gain recognized (not realized) by person transferring -Reduction for loss |
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Non-qualified preferred stock?
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BOOT BITCH BB all the way. You know it is if:
Shareholder can require the corp to redeem it. or cop likely to. |
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May need to allocate a basis based on weighted fractions.
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Such as common and preferred stock.
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Transferor's Holding Period?
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Stock holding period includes holding period of property received in Sec. 351 if property is capital or 1231. Day after exchange is any other property.
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