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Tag Archive for IRC 358(a)

Tax Treatment – IRC 351 Nonrecognition Transactions aka “Corporate Reorganizations”

Check out the following five lessons I learned this week regarding IRC 351 nonrecognition transactions:

1. The basis assigned to stock received generally is the same as the basis in the property transferred to the corporation. If however you also receives boot from the corporation your basis must be decreased by the amount of any money received plus the fair market value of any other property received (aka BOOT).

2. Your basis under IRC 358(a) must also be increased by the amount of any gain recognized due to any boot received. Specifically if you transfers property with a fair market value of $700,000 and a basis of $300,000 to a corporation in exchange for common stock with a fair market value of $500,000 and cash of $200,000 your basis in the stock is equal to $300,000 which is calculated as follows:

$300,000 basis in property transferred – $200,000 boot received (as cash) + $200,000 gain recognized due to receipt of boot.

3. When transferred property is subject to a liability that the corporation assumes, the amount of the liability generally is not treated as boot for purposes of determining any taxable gain on the transaction. However, the amount of the liability generally is treated as boot for purposes of determining your basis in Read more

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