Question

Discuss the objective and reason for the Section 351 tax provision?

What are the the requirements for Section 351?

Answer 1

The section 351 relates to the provisions of the transfer to incorporation controlled by transferor. This section provides various controls such as under this section no gain or loss is to be recognised if any property is transferred by any person to the corporation in exchange of stock in such corporation and further it provides that immediately after such exchange such person/persons are in control of the corporation.

Section 351 also provides that tax free incorporation transfer only requiring certain provisions are to be met including the transfer to be made only in exchange of stock of the corporation.

This section 351 provides that no loss to such transfer shall be recognised.

Gain to such transfer can be recognised not in excess of :-

A) the transfer amount received, plus

B) the market value of the transfer received.