CA312 Chapter 4 Key Terms
South-Western Federal Taxation 2015: Corporations, Partnerships, Estates and Trusts, 38th Edition
Terms in this set (6)
Section 351, 4-2
Section 351 deals with transfers to controlled corporations (defined later in the chapter), provides that gain or loss is not recognized upon the transfer of property to a corporation when certain conditions are met. For example, when a business is incorporated, the owner's economic status remains the same; only the form of the investment has changed.
Holding a specified level of stock ownership in a corporation. For § 351, the new shareholder(s) must hold at least 80 percent of the total combined voting power of all voting classes of stock. Other tax provisions require different levels of control to bring about desired effects, such as 50 or 100 percent.
Assets defined in the broadest legal sense. Property includes the unrealized receivables of a cash basis taxpayer, but not services rendered. § 351.
Built-in loss property, 4-14
Property contributed to a corporation under § 351 or as a contribution to capital that has a basis in excess of its fair market value. An adjustment is necessary to step down the basis of the property to its fair market value. The adjustment prevents the corporation
Capital contribution, 4-17
Various means by which a shareholder makes additional funds available to the corporation (placed at the risk of the business), sometimes without the receipt of additional stock. If no stock is received, the contributions are added to the basis of the shareholder's existing stock investment and do not generate gross income to the corporation. § 118.
Section 1244 stock, 4-23
Stock issued under § 1244 by qualifying small business corporations. If § 1244 stock becomes worthless, the shareholders may claim an ordinary loss rather than the usual capital loss, within statutory limitations.
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