When a corporation is formed, if the transferors own 80% or more of the corporation immediately after the exchange, then the transaction is, generally, tax-free. True False
Don't use plagiarized sources. Get Your Custom Essay on
Question & Answer: When a corporation is formed, if the transferors own 80% or more of the corporation imm…..
GET AN ESSAY WRITTEN FOR YOU FROM AS LOW AS $13/PAGE
The given statement is true according to Section 351 (a).
For the transaction to be tax free,
Those who transferred the property must own 80% of the stock of the corporation immediately after the exchange.
Non recognition is granted only to the transferor of the property.
The transferor must transfer property to the corporation and receive only stock of the corporation in exchange.