Section 357 C Gain

357 b 1 b 2 c 2 a reg.

Section 357 c gain. Even if a bona fide business reason exists for the transfer of debt and there is no tax avoidance gain is recognized by the transferor shareholder to the extent the aggregate amount of debt transferred to the corporation exceeds the shareholder s basis in the property transferred sec. Internal revenue code section 357 c assumption of liability. 357 a 1 the taxpayer receives property which would be permitted to be received under section 351 or 361 without the recognition of gain if it were the sole consideration and i r c.

Except as provided in subsections b and c if. No n a no sec. 1 357 1 c the total amount of the liabilities assumed in the exchange and not merely a particular liability with regard to which the tax avoidance purpose existed is for purposes of section 351 or 361 as the case may be considered.

The treasury regulations prescribe a method for determining the character of section 357 c gain that allocates the gain according to the relative fair market value of the transferred assets. Assets have realized loss and there is only one asset with realized gain. 357 a 2.

If the sum of the amount of the liabilities assumed exceeds the total of the adjusted basis of the property transferred pursuant to such exchange then such excess shall be considered as a gain from the sale or exchange of a capital asset or of property which is not a capital asset as the case may be. Section 357 does not apply to the transaction. The statute suggests that the character of section 357 c gain should be based on the character of the transferred assets but this does not provide a clear answer when two or more assets of differing character are transferred to the corporation.

Abstract the provisions contained in irc sec 357 should be carefully examined so that the non taxable status of the transfer of liabilities to a controlled corporation made under sec 351 will not be jeopardized. A transferor may seek to avoid this unhappy. Where either all of the transferred assets have realized gain or one or more.

Adjusted basis of the property transferred section 357 c provides that the excess is a taxable gain. 1 the taxpayer receives property which would be permitted to be received under section 351 or 361 without the recognition of gain if it were the sole consideration and 2 as part of the consideration another party to the exchange assumes a liability of the taxpayer. This determination is made on a transferor by transferor basis.