Section 351 Requirements

Section 351 a 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.

Section 351 requirements. If the requirements of section 355 or so much of section 356 as relates to section 355 are met with respect to a distribution described in paragraph 1 then solely for purposes of determining the tax treatment of the transfers of property to the controlled corporation by the distributing corporation the fact that the shareholders of the distributing corporation dispose of part or all of the distributed stock or the fact that the corporation whose stock was distributed issues. The transaction must involve a corporation and a person or people. Irc section 351 has several requirements.

If any shareholder involved in the transaction receives equity for services or something other than voting stock the transaction may not qualify for tax deferral. You or you and your transferor group for example partners incorporating the partnership may only receive stock other than nonqualified preferred stock from the corporation in exchange for the property you transfer and. Every significant transferor must include a statement entitled statement pursuant to 1 351 3 a by insert name and taxpayer identification number if any of taxpayer a significant transferor on or with such transferor s income tax return for the taxable year of the section 351 exchange.

Section 351 requires that the transfer of property must be solely in exchange for stock or securities of the transferee corporation. Not stock plus other property. 1 you get only stock in exchange for your property.

If the requirements of section 355 or so much of section 356 as relates to section 355 are met with respect to a distribution described in paragraph 1 then solely for purposes of determining the tax treatment of the transfers of property to the controlled corporation by the distributing corporation the fact that the shareholders of the distributing corporation dispose of part or all of the distributed stock or the fact that the corporation whose stock was distributed issues. Overview of requirements section 351 provides non recognition treatment only if the following statutory requirements are satisfied. Two requirements must be met to qualify for tax free treatment under section 351 a.

There must be a transfer of property to a corporation. 351 allows a tax free incorporation transfer if certain requirements are met including that the property must be transferred to a corporation by one or more persons in exchange for stock in the corporation and immediately after the exchange the transferor s is are in control as defined in sec. 368 c of the corporation.

Money or other property received will result in gain recognition. There have been more than a few questions over the years as to the meaning of the stock or securities phrase.