Discussion:Sec. 351 Transfer in advance of sale.
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| Revision as of 02:06, 17 August 2006 Dennis (Talk | contribs) (Given the abilit) ← Previous diff |
Revision as of 04:41, 17 August 2006 MSTguy (Talk | contribs) (This isn't exact) Next diff → |
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| {{ForumReplyPost|UserID=Dennis|Date=17 August 2006|Text=Given the ability to liquidate the corp and use the $90K business bad debt to offset capital gain on sale, I don't see the application of [[Reg. 1.482-1]]. Guy wants to keep the Corporation.}} | {{ForumReplyPost|UserID=Dennis|Date=17 August 2006|Text=Given the ability to liquidate the corp and use the $90K business bad debt to offset capital gain on sale, I don't see the application of [[Reg. 1.482-1]]. Guy wants to keep the Corporation.}} | ||
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| + | {{ForumReplyPost|UserID=MSTguy|Date=17 August 2006|Text=This isn't exactly on point, but it just sounds similar enough to me. In Foster, the IRS "concluded that it could use Code Sec. 482 to reallocate gain from a transferee-corporation in a Code Sec. 351 transfer to a controlled corporation to the transferor-shareholder. ... IRS said that the transferee's automatic gain recognition on sale of the transferred asset under 351 could be reallocated from the transferee-corporation to the transferor because the transfer was made for the tax avoidance purpose of offsetting the gain against the corporation's net operating loss." Source: RIA Checkpoint | ||
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| + | It just sounds like there isn't any business purpose other than utilizing the net operating loss. It shifts unrealized gain properly earned and attributable to the shareholder to a corporation which hasn't earned any income solely to shelter gain and utilize a corporate attribute. | ||
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| + | But hey, I'm not saying it couldn't be done, just that it sounds like it has some exposure. | ||
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Revision as of 04:41, 17 August 2006
Discussion Forum Index --> Tax Questions --> Sec. 351 Transfer in advance of sale.
| 16 August 2006 | |
| C Corp operates soft ice cream stand. Balance sheet: Officer loans $90,000 Retained earnings negative $90,000. Carryforward NOL $90,000. ( Fully depreciated) building and land owned separately by sole shareholder. Can building be transferred (in exchange for stock) to and sold by corp to eat carryforward loss? | |
| 17 August 2006 | |
| I think there would be a problem here with a Section 482 reallocation. Courts have held that section 482 overrides section 351, and Regs. 1.482-1(f)(1) confirm this. The IRS could easily spot this and come in and reallocate the income on sale of the building to the transferee-shareholder in order to more clearly reflect income and prevent evasion of taxes (although I don't think the IRS would argue for evasion of taxes here since burden of proof becomes theirs). | |
| 17 August 2006 | |
| Given the ability to liquidate the corp and use the $90K business bad debt to offset capital gain on sale, I don't see the application of Reg. 1.482-1. Guy wants to keep the Corporation. | |
| 17 August 2006 | |
| This isn't exactly on point, but it just sounds similar enough to me. In Foster, the IRS "concluded that it could use Code Sec. 482 to reallocate gain from a transferee-corporation in a Code Sec. 351 transfer to a controlled corporation to the transferor-shareholder. ... IRS said that the transferee's automatic gain recognition on sale of the transferred asset under 351 could be reallocated from the transferee-corporation to the transferor because the transfer was made for the tax avoidance purpose of offsetting the gain against the corporation's net operating loss." Source: RIA Checkpoint
It just sounds like there isn't any business purpose other than utilizing the net operating loss. It shifts unrealized gain properly earned and attributable to the shareholder to a corporation which hasn't earned any income solely to shelter gain and utilize a corporate attribute. But hey, I'm not saying it couldn't be done, just that it sounds like it has some exposure. | |
