What is IRS Code Section 351?

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 (as defined in § 368(c)) of the corporation.

What is a nonqualified preferred stock?

Nonqualified preferred stock is debt-like preferred stock that is treated as boot in a Section 351 exchange or a reorganization, for purposes of the shareholder’s taxation; however, it is treated as stock for other purposes.

Is stock considered property under section 351?

The property qualifying for Section 351 exchange treatment must be transferred solely in exchange for the transferee corporation’s stock. Stock for Section 351 purposes includes common or preferred stock, but excludes stock rights, securities and nonqualified preferred stock (NQPS) of the transferee corporation.

What is considered property under section 351?

Property for purposes of section 351 includes “secret processes and for- mulas,” and any other secret information pertaining to processes in the general nature of a patentable invention, without regard to whether a patent has been applied for or whether the information is patentable.

Does section 351 include cash?

Additionally, Cash Is considered property for purposes of Section 351. Additionally, Securities are considered property for purposes of IRC §351.

What is a busted 351 transaction?

Section 351(a) provides that no gain or loss will be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock or securities in such corporation and immediately after the exchange such person or persons are in control of the corporation.

What is NQPS?

Acronym. Definition. NQPS. National Quality and Performance System (Australia)

Does Code section 351 apply to S corps?

Normally, if you transfer appreciated property to a corporation, tax consequences will result. You will recognize a gain or loss. Section 351 of the Internal Revenue Code provides an exception to this general rule, however. This code section applies to S corporations and C corporations alike.

Can gain ever be recognized in a section 351 transfer if boot is not received?

Gain is recognized on a § 351 transfer if the transferor receives cash as boot in the exchange. Gain is recognized to the extent of the lesser of the gain realized or the boot received.

What does property include for purposes of 351?

The definition of property for §351 purposes is very broad and includes tangible and intangible assets (e.g., company name, patents, customer lists, trademarks, and logos).

What is a 99 6 transaction?

Revenue ruling 99-6 provides guidance when a multiple-member LLC is converted to a single-owner entity for tax purposes. The ruling also addresses the conversion issue from two perspectives. One LLC member sells his or her full ownership interest to another member, making the transferee the sole owner.

What is a section 721 transaction?

A 721 exchange is similar to the 1031 exchange. IRC Section 721 allows investors to exchange appreciated real estate property held for business or investment purposes for units in an operating partnership that will be converted into shares of the real estate investment trust (REIT).

What makes a stock a nonqualified preferred stock?

(a) Stock issued prior to effective date. Stock described in section 351 (g) (2) is nonqualified preferred stock (NQPS) regardless of the date on which the stock is issued.

When is no gain or loss recognized under Section 351?

No gain or loss is recognized by a transferor of “property” to a corporation solely in exchange for stock of the corporation, other than nonqualified preferred stock within the meaning of Section 351(g)(2), if, immediately after the transfer, the

What are the requirements for Section 351 tax free exchange?

Two requirements must be met to qualify for tax-free treatment under Section 351 (a): 1 – You get ONLY STOCK in exchange for your property; NOT stock PLUS other property.

When does Section 351 ( a ) apply to a transferor?

Rev. Rul. 59-259, 1959-2 C.B. 115. If Section 351(a) would applybut for the transferor’s receipt of consideration (including nonqualified preferred stock) other than qualified stock of the transferee corporation, the transferor recognizes any gain realized up to the fair