C239 EXAMINATION QUESTIONS AND VERIFIED
ANSWERS
Sec 351 - Three requirements:
1.transferror transfers for property
2. Solely in exchange for the corporation stock
3. Have to have control immediately following transaction
Control of 80% of (combined voting and nonvoting) each voting stock and nonvoting stock
Not valid with transferring in service and does not get considered in terms of control for Sec 351
eligibilty for that trnasferror. However, if this persons contribution dilutes the control, then any gain on
tranferring would be taxed to all shareholders.
The transferrer transferring services could transfer property at least 10% of the FMV of the stock being
received. This will prevent the gains being recognized at transfer.
Boot rule - Recognized gain is the lesser of:
Transferrors realized gain or FMV of the boot received
Boot received in a Sec 351 transaction never causes a recognition of loss.
Sec 351 transactions when liabilities are transferred - Transferring something other than property,
so there are exceptions to liabilities being boot which is not normal.
Sec 357(c) =recognized gain is the excess of liabilities transferred to the corporation OVER the adjusted
basis of all properties transferred.
Liability must be a bonafide business debt.
Sec 351 transferrors calculator for basis - Boot rule applies
Adjusted Basis of the received shares=
Adjusted basis of property transferred to the corporation + any gain recognized (boot) -FMV of the boot
received -any liabilities assumed by the corporation in the transfer
ANSWERS
Sec 351 - Three requirements:
1.transferror transfers for property
2. Solely in exchange for the corporation stock
3. Have to have control immediately following transaction
Control of 80% of (combined voting and nonvoting) each voting stock and nonvoting stock
Not valid with transferring in service and does not get considered in terms of control for Sec 351
eligibilty for that trnasferror. However, if this persons contribution dilutes the control, then any gain on
tranferring would be taxed to all shareholders.
The transferrer transferring services could transfer property at least 10% of the FMV of the stock being
received. This will prevent the gains being recognized at transfer.
Boot rule - Recognized gain is the lesser of:
Transferrors realized gain or FMV of the boot received
Boot received in a Sec 351 transaction never causes a recognition of loss.
Sec 351 transactions when liabilities are transferred - Transferring something other than property,
so there are exceptions to liabilities being boot which is not normal.
Sec 357(c) =recognized gain is the excess of liabilities transferred to the corporation OVER the adjusted
basis of all properties transferred.
Liability must be a bonafide business debt.
Sec 351 transferrors calculator for basis - Boot rule applies
Adjusted Basis of the received shares=
Adjusted basis of property transferred to the corporation + any gain recognized (boot) -FMV of the boot
received -any liabilities assumed by the corporation in the transfer
