Business Services Industry
Transfers to investment companies: pitfalls of secs. 351 and 721.
Tax Adviser, The, August, 2007 by Velotta, Robert A.
In many instances, property can be contributed to an entity by its owners in exchange for ownership interests, without gain or loss being recognized on the contribution. For corporations, the general rule under Sec. 351(a) is that "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 ... of the corporation." Similarly, the general rule under Sec. 721(a) states that "no gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership" Both sections, however, contain lesser-known...
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