C12-Chp-04-3D-Donald-Peracchi - Corporate Tax Research...

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Unformatted text preview: Corporate Tax Research Project-February 2004 Donald Peracchi, needed to contribute additional capital to his closely-held corporation (NAC) to comply with Nevadas minimum premium-to-asset ratio for insurance companies. Peracchi contributed two parcels of real estate. The parcels were encumbered with liabilities which together exceeded Peracchis total basis in the properties by more than half a million dollars. Peracchi sought to contribute two parcels of real property to NAC in a section 351 transaction. Standing alone the contribution would have run afoul of section 357(c): The property he wanted to contribute had liabilities in excess of basis, and Perachhi would have had to recognize gain to the extent of the excess, or $566,807: Liabilities Basis Property #1 $1,386,65 5 $349,774 Property #2 161,558 631,632 $1,548,21 3 $981,406 Liabilities 1,548,213 Basis 981,406 Excess (357(c)) $566,807 Peracchi tried to dig himself out of this tax hole by contributing a personal note with a face amount...
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C12-Chp-04-3D-Donald-Peracchi - Corporate Tax Research...

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