Section 351 Tax Essay
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 arrangement of the code is broken down starting with a Subtitle, broken down into chapter, subchapter, part, and then section (2). It is extremely important for Corporations today to make sure they understand the tax code so they can be aware of the benefits and consequences that may arise in daily business transactions. Asset and property transactions are a large of certain corporations day-to-day operations. Normally property and asset transactions will produce tax consequences if a gain or loss is realized. A transfer of property to a corporation in exchange for equity creates the grounds for a taxable sale and the amount to be recognized but there are exceptions to the rule (4). The code does provide exceptions to the rule and allows ways around recognizing a gain or loss upon the transfer of property to a corporation. Section 351(a) is one exception to the rule. The general rule states, “No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation”, according the internal revenue code (1). The idea and
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 arrangement of the code is broken down starting with a Subtitle, broken down into chapter, subchapter, part, and then section (2). It is extremely important for Corporations today to make sure they understand the tax code so they can be aware of the benefits and consequences that may arise in daily business transactions. Asset and property transactions are a large of certain corporations day-to-day operations. Normally property and asset transactions will produce tax consequences if a gain or loss is realized. A transfer of property to a corporation in exchange for equity creates the grounds for a taxable sale and the amount to be recognized but there are exceptions to the rule (4). The code does provide exceptions to the rule and allows ways around recognizing a gain or loss upon the transfer of property to a corporation. Section 351(a) is one exception to the rule. The general rule states, “No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in section 368(c)) of the corporation”, according the internal revenue code (1). The idea and
Cited: (2) Hoffman, Raabe, Smith, and Maloney. Corporations, Partnerships, Estates and Trusts. N.p.: South-Western, 2012. Print. (5) Silverman, and Johnson. "Assessing the Value of the Proposed “No Net Value” Regulations." Steptoe and Johnson LLP, 6 Oct. 2006. Web.