Section 351 Tax Essay

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Writing Project-Accounting 757 Professor Stevens December 17th 2012 In the United States today there are millions of corporations in many different industries. All of them must abide by the current taxation rules and regulations that have been set by IRS and congress. The Internal Revenue Code, which was originally founded in 1939, set the foundation for the codification that we have in place today. The code arranged all Federal Tax provisions in a logical order and placed them in a separate part of the federal status. Over the years, congress has updated and amended the tax code in 1954, in 1986 Tax Reform Act, and is constantly updating the code due to its importance in assessing judicial and administrative decisions. The…show more content…
During the transaction, if the transferor receives boot, section 351(b) requires them to recognize the gain (capital, long-term, or short-term) equal to the lessor of the gain that would be recognized under section 1001 if the transferor were treated as selling property transferred and the fair market value of the boot received. Under section 351(b)(2), no such loss of any realized loss to be recognized (4)(8). There are situations where once the 351(a) factors are met, a transferor will transfer stock received to someone outside of the control group, and then the requirement after might not be met. A transferor might distribute some of the control received to the shareholders after the requirement based on 351(c). This type of distribution can be taxable to both the shareholders and the distributing corporation. Section 351(c) also relates to situations where there has been a transfer of stock to a corporation in a section 355 transactions (7). Section 351(c)(2) allows shareholders to dispose of all or part of the transfers stock without preventing the corporations Section 351 transaction from satisfying the “ control immediate after” requirement (4). Section 351(d) states that there are times when services, certain indebtedness, and accrued interest not treated as property as per James v. Commissioner, 53 T.C. 63 (1969); cf. Hospital Corporation of America v. Commissioner, 81 T.C. 520
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