Textbook Tax

Sec. 351 covers nontaxable contributions between the shareholders and the corporation. In order to qualify as a nontaxable event, the transaction must meet the Sec. 351 requirements: Transferred property, transferred property in exchange for stock, and the shareholders contributing property (transferring group) own 80% of the corporation's stock immediately after the exchange. It is important to note that the Sec. 351 nontaxable contribution rule applies to new corporate formations as well as contributions to existing corporations as long as the three requirements are met. Lets begin with defining the above terms: Transferred property refers to both tangible and intangible property exchanged for stock property does not include services; if the shareholder exchanges services for stock, the shareholder recognizes ordinary income (FMV) "In exchange for stock" anything other than stock is NOT stock; therefore, any property other than stock is called b...