T11F-Chp-13-05D-Transfer of Assets to Corporation

T11F-Chp-13-05D-Transfer of Assets to Corporation - Tab: 1....

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Tab: 1. Notes on Organ of Corp. File: 702b0229436bdd1994bf890efe79df185c226465.xls Page 1 of 2 IRS-PUB, 2001, IRS Publication No. 544, Property Exchanged for Stock (Edited by Instructor) If you transfer property to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. This rule applies both to individuals and to groups who transfer property to a corporation. It does not apply in the following situations. The corporation is an investment company. You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. You both organize a corporation when the property has a fair market value of $300,000. You transfer the property to the corporation for all its authorized capital stock, which has a par value (and FMV) of $300,000. No gain is recognized by you, Bill, or the corporation. for stock with a fair market value of $300,000. This represents only 75% of each class of stock of the corporation. The other 25% was already issued to someone else. You and Bill recognize a taxable gain of $200,000 on the transaction. issuing corporation. The value of stock received for services is income to the recipient. in exchange for stock valued at $38,000. Right after the exchange, you own 85% of the outstanding stock. No gain is recognized on the exchange of property. However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. Property transferred will not be considered to be of relatively small value if its fair market value is at
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This note was uploaded on 03/09/2012 for the course ACCT 4220 taught by Professor Burton during the Spring '08 term at UNC Charlotte.

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T11F-Chp-13-05D-Transfer of Assets to Corporation - Tab: 1....

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