To qualify for Sec. 351, a sole proprietor must be in control of the receiving corporation...

To qualify for Sec. 351, a sole proprietor must be in control of the receiving corporation immediately after the exchange of assets for the corporation’s stock. “Control” for this purpose means ownership of stock amounting to at least:

a) 50%
b) 51%
c) 66.67%
d) 80%
e) None of the above

Solutions

Expert Solution

Answer : Option D 80%

Sec. 351 allows a tax-free incorporation transfer if certain requirements are met, including that the property must be transferred to a corporation by one or more persons in exchange for stock in the corporation, and, immediately after the exchange, the transferor(s) is (are) in control (as defined in Sec. 368(c)) of the corporation.

Sec. 368(c) defines control as the ownership of stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation.

ekkarill92 answered 1 year ago

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