Formation of S and C Corporations

Description

The participant will become aware of problems and pitfalls to avoid when property is transferred to a corporation in exchange for an interest in the corporation (a §351 transfer), including both organizing the business as corporation under state law and the tax effect of "checking the box."

Highlights

LINK AND INSTRUCTIONS TO COME FROM AES TAX ONE DAY PRIOR TO SESSION

Objectives

After completing this course the participant will be able to:

• Describe the tax effects if an LLC "checks the box."
• Describe the basic requirements under §351 when property is transferred to a corporation in exchange for an interest in the corporation.
• Define the term "property" for §351 transfers.
• Define the term "debt" and identify strategies to use to avoid debt in excess of basis.
• Determine the treatment of boot in a §351 transfer and when gain is recognized on a §351 transfer and illustrate the most common situation where gain is recognized when forming a corporation or advising an LLC to check the box to make an S election.
• Define the term "accommodation transferor."
• Apply the control test to a §351 transfer.
• Determine the shareholder's basis in stock received and the corporation's basis in the property received in a §351 transfer. (See Form 7203.)
• Determine the holding periods for property transferred and the stock received.
• Explain the recapture provisions and the transfer of an installment obligation in a §351 transfer.
• Illustrate how to treat boot in the form of an installment note.
• Calculate the depreciation on the property transferred in a §351 transaction.