Determine how non liquidating distributions will be addressed

09-Jun-2016 18:12 by 3 Comments

Determine how non liquidating distributions will be addressed

For most tax practitioners, this would elicit the following Pavolovian reaction: “You should NEVER put real estate inside a corporation.” And while there are very few NEVERS in the tax world, this one is pretty darn accurate.

Sometimes in life, when faced with a given situation, we say things simply as a matter of reflex. ” “You have a lovely home here.” “You’re a great gal, I’ll call you sometime. Take, for example, the client who contemplates the type of entity that should be used to hold a piece of real estate.This is often referred to as a “substituted basis,” because the basis in the property received is determined in reference to the basis in the property relinquished.In turn, Section 362 provides that the corporation must take a basis in the building equal to your basis in the building.If, for example, A’s property were subject to a 0,000 mortgage, the transfer of the property to a corporation in exchange for corporate stock would generate 0,000 (0,000 debt relief less 0,000 tax basis) of gain to A, even if the transfer were otherwise tax-free under Section 351.Basis and Holding Period When Section 351 applies to a transfer of property to a corporation, the gain is not excluded, it is merely deferred.It’s because, as the ensuing discussion will reflect, while real estate can go into a corporation tax-free, it can never come out tax free.

In today’s Tax Geek Tuesday, let’s peel back the layers of the statute and find out why.

A and B would like to form a business that will use both the business assets owned by B and the building owned by A. Should the entity be a C corporation, S corporation, or partnership?

Transfers to Controlled Corporations, In General Under the general tax principles of Section 1001, the transfer of appreciated property triggers gain for the difference between the amount realized on the transfer less the adjusted tax basis of the property.

Case study: A, an individual, owns a building with a basis of 0,000 and a fair market value of

In today’s Tax Geek Tuesday, let’s peel back the layers of the statute and find out why.

A and B would like to form a business that will use both the business assets owned by B and the building owned by A. Should the entity be a C corporation, S corporation, or partnership?

Transfers to Controlled Corporations, In General Under the general tax principles of Section 1001, the transfer of appreciated property triggers gain for the difference between the amount realized on the transfer less the adjusted tax basis of the property.

Case study: A, an individual, owns a building with a basis of $400,000 and a fair market value of $1,000,000.

B, another individual, owns business assets worth $1,000,000.

If you contribute appreciated property to a corporation in exchange for, say 20% of the corporation’s stock, but simultaneous to the transfer, another two individuals transfer cash or property to the corporation in exchange for an additional 65% of the stock, all three transfers are covered by Section 351 because on a combined basis, the transferor group controls the corporation immediately after the transfer.

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In today’s Tax Geek Tuesday, let’s peel back the layers of the statute and find out why.A and B would like to form a business that will use both the business assets owned by B and the building owned by A. Should the entity be a C corporation, S corporation, or partnership?Transfers to Controlled Corporations, In General Under the general tax principles of Section 1001, the transfer of appreciated property triggers gain for the difference between the amount realized on the transfer less the adjusted tax basis of the property.Case study: A, an individual, owns a building with a basis of $400,000 and a fair market value of $1,000,000.B, another individual, owns business assets worth $1,000,000.If you contribute appreciated property to a corporation in exchange for, say 20% of the corporation’s stock, but simultaneous to the transfer, another two individuals transfer cash or property to the corporation in exchange for an additional 65% of the stock, all three transfers are covered by Section 351 because on a combined basis, the transferor group controls the corporation immediately after the transfer.

,000,000.

B, another individual, owns business assets worth

In today’s Tax Geek Tuesday, let’s peel back the layers of the statute and find out why.

A and B would like to form a business that will use both the business assets owned by B and the building owned by A. Should the entity be a C corporation, S corporation, or partnership?

Transfers to Controlled Corporations, In General Under the general tax principles of Section 1001, the transfer of appreciated property triggers gain for the difference between the amount realized on the transfer less the adjusted tax basis of the property.

Case study: A, an individual, owns a building with a basis of $400,000 and a fair market value of $1,000,000.

B, another individual, owns business assets worth $1,000,000.

If you contribute appreciated property to a corporation in exchange for, say 20% of the corporation’s stock, but simultaneous to the transfer, another two individuals transfer cash or property to the corporation in exchange for an additional 65% of the stock, all three transfers are covered by Section 351 because on a combined basis, the transferor group controls the corporation immediately after the transfer.

||

In today’s Tax Geek Tuesday, let’s peel back the layers of the statute and find out why.A and B would like to form a business that will use both the business assets owned by B and the building owned by A. Should the entity be a C corporation, S corporation, or partnership?Transfers to Controlled Corporations, In General Under the general tax principles of Section 1001, the transfer of appreciated property triggers gain for the difference between the amount realized on the transfer less the adjusted tax basis of the property.Case study: A, an individual, owns a building with a basis of $400,000 and a fair market value of $1,000,000.B, another individual, owns business assets worth $1,000,000.If you contribute appreciated property to a corporation in exchange for, say 20% of the corporation’s stock, but simultaneous to the transfer, another two individuals transfer cash or property to the corporation in exchange for an additional 65% of the stock, all three transfers are covered by Section 351 because on a combined basis, the transferor group controls the corporation immediately after the transfer.

,000,000.

If you contribute appreciated property to a corporation in exchange for, say 20% of the corporation’s stock, but simultaneous to the transfer, another two individuals transfer cash or property to the corporation in exchange for an additional 65% of the stock, all three transfers are covered by Section 351 because on a combined basis, the transferor group controls the corporation immediately after the transfer.