Chapter 13 - Chapter 13 C Corporations IRC 351 No gain or loss shall be recognized if property is transferred to a corporation by one or more persons

Chapter 13 - Chapter 13 C Corporations IRC 351 No gain or...

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Chapter 13: C Corporations IRC 351: No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stocks in such corporation and immediately after the exchange such person or persons are in control of the corporation Many Examples on Slides Taxable Dividends Only a C Corporation can pay dividends Tier Distributions other than stock Tax Treatment to Shareholders 1. Current Earnings and Profits Dividend 2. Accumulated Earning and Profits Dividend 3. Shareholder’s basis in the stock Nontaxable return of capital 4. Any balance remaining Capital gain Property Dividends Effect on corporation: o Corp. is treated as if it sold the property for fair market value Corp. recognizes gain, but not loss o Increases E&P for excess of FMV over basis of property distributed o Reduces E&P by FMV of property distributed (or basis, if greater) less liabilities on the property N.B: If distributed property is subject to a liability in excess of basis, the fair market value

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