Class 6c Corp Formation

Class 6c Corp Formation - Taxation of the Business Entity...

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Unformatted text preview: Taxation of the Business Entity Online Lecture Series Presented by Akore Berliner, CPA Corporate Formation Consequences of §351 • In general, no gain or loss to transferors : ▫ On transfer of property to corporation ▫ In exchange for stock ▫ IF immediately after transfer, transferors are in control of corporation Consequences of §351 • If boot (property other than stock) received by transferors ▫ Gain recognized up to lesser of:  Boot received or  Realized gain ▫ No loss is recognized Formation Example Ron will incorporate his donut shop: Asset Fair Mkt Tax Basis Value . Cash $10,000 $ 10,000 Furniture & Fixtures 20,000 60,000 Building 40,000 100,000 Total $70,000 $170,000 • Without §351: gain of $100,000. • With §351: no gain or loss. Ron’s economic status has not changed. Issues re: Property • Definition of property includes : ▫ Cash ▫ Secret processes and formulas ▫ Unrealized accounts receivable (for cash basis taxpayer) ▫ Installment obligations • Code specifically excludes services from definition of property. Issues re: Stock Transferred...
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This note was uploaded on 08/11/2011 for the course ACCT 103 taught by Professor Huxhold during the Spring '11 term at San Diego.

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Class 6c Corp Formation - Taxation of the Business Entity...

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