Question

• Describe the principle/law of an IRC 351 transaction. • Describe how a B Reorg works. • What is a fundamental difference between IRC 368 transaction and IRC 351 transactions?

Answer 1

(Ans) Internal revenue code (IRC) Sec 351 is a provision of us code which allows an individual or corporation to differ gain or loss /appreciation or depreciation while transferring the property to a corporation in exchange of stock. It allows an individual to change the form of an enterprise without incurring tax liability. Thus a taxpayer may avoid recognition of gain "where a gain or loss may be accrued in a constitutional sense,but where in economic sense there has been the change in the form of ownership and the taxpayer has not really cashed-in on a theoretical gain or closed out a losing venture.sec 351 allows taxpayer to incorporate their business without facing a prohibited tax IRC sec 351 states that no gain or loss loss shall be recognized if property is transferred to a corporation by one one more person's soley In exchange for stock or securities in such cooperation and immediately after the exchange such person or persons are on control of the corporation They three basic requirements of sec. 351 (1) transfer of property there should be the transfer of property le any property (such as patent right trade secret leaseholds goodwill but service are not included in it (2) solely in exchangey for the coorpation stock (3) And the control immediately after wards: