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Unformatted text preview: 14-4What is the purpose of Code Sec. 351 in regard to transfers to corporations?Section 351 provides that no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock, in such corporation and immediately after the exchange such person or persons are in control of the corporation. According to the textbook there are three major requirements of Code Sec. 351: (1) the transfer must consist of property, (2) the transfer must be solely in exchange for stock, and (3) the transferors must be in control immediately after the exchange. One of the benefits of the Code Sec. 351 is that provides for no recognition of gain or loss upon transfer of property to a corporation in return for its stock and until there is a change in the corporation’s investments.14-20What tax years are available to corporations? How do the options differ from other forms of business organizations?According to the textbook corporations may choose a calendar year or a fiscal year. However, a corporation has more flexibility in choosing its accounting period. It may choose any calendar or fiscal tax year regardless of the tax years of its owners. This ability to have a tax year different from that of its owners can produce tax savings, especially in the year of incorporation.Other entities do not have this freedom. For example, S corporations are required to adopt the calendar year unless they can establish a business purpose for a fiscal year.A partnership must conform its tax year to its partners’ tax years unless any of the following apply. 1) The partnership makes a section 444 election. 2) The partnership elects to use a 52-53 week tax year that ends with reference to either its required tax year or a tax year elected under section 444 or 3) The partnership can establish a business purpose for a different tax year. All S corporations regardless of when they become an S corporation must use a permitted tax year....
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This note was uploaded on 03/26/2012 for the course ACCT 553 taught by Professor Seda during the Spring '10 term at Keller Graduate School of Management.
- Spring '10