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Debate the following proposition: All corporate formation transactions should be taxable events.

Debate the following proposition: All corporate formation transactions should be taxable events.

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Answer #1

Pro's for this topic

A)Simplification is achieved by eliminating one of the two options- whether a transaction is taxable or not. This change will make administration of the tax laws easier


B) This change eliminates the need for taxpayers to structure transactions to avoid Sec. 351 to recognize gains and/or losses

Con's for this topic

A) This change would hurt start-up corporations by reducing their capital through the income tax paid by transferors on an asset transfer.

B) With taxation, corporations will have to raise more capital because transferors of noncash property will have reduced capital to invest and because money must be diverted to pay taxes.

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