What is the objective and reason for the Section 351 tax provision. What are the requirements...

What is the objective and reason for the Section 351 tax provision.

What are the requirements for Section 351?

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Expert Solution

Internal Revenue Code of 1954, Section 351 tax provision accords non-recognition treatment to any loss or gain realized upon the incorporation of a business. The main purpose of the policy of section 351 is to permit the taxpayers for incorporating their businesses without facing a prohibitive tax. Through non-recognition treatment, and its attendant savings on tax, the provision facilitates the property acquisition by small corporations in securities exchange. These exchanges may be more beneficial compared to purchase assets with either borrowed money that entails principal payments and incurring interest or raised money through the public sale of equity securities.

Section 351 statuary requirements are:

-- The requirement that there is a transfer of property

-- There is an exchange for securities or stock for the property

-- The transferor or transferors are in corporation control immediately after the transfer

ekkarill92 answered 1 year ago

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