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Old 11-24-2015, 10:58 PM
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Stock trade for real property taxation

Have a good friend that is divesting out of a C corp he owns a small portion of. This C corp holds quite a bit of land and all parties have agreed to trade his shares of stock for some land of equal value. For easy math we are talking roughly 5% of stock for $350K worth of land. Basis on land is virtually nothing as it has been held for a very long time and never stepped up. Is the only tax liability on the C corp which has to show that incoming stock as an income or are both parties taxed or neither?

Would it make any difference if he say only traded half the stock and still held a position in the C corp.



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Old 11-25-2015, 07:35 AM
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Have a good friend that is divesting out of a C corp he owns a small portion of. This C corp holds quite a bit of land and all parties have agreed to trade his shares of stock for some land of equal value. For easy math we are talking roughly 5% of stock for $350K worth of land. Basis on land is virtually nothing as it has been held for a very long time and never stepped up. Is the only tax liability on the C corp which has to show that incoming stock as an income or are both parties taxed or neither?=====>> The corp does not recognize gain or loss unless the corporation transfers/receives shares of its own stock as compensation for services .. the shareholder does not recognize gain / loss on the transfer of assets to the c corp in exchange for stock as long as the shareholder must transfer “property” to the corp in exchange for stock. But when the S/H also receives property other than stock, he may have to recognize gain. The S/H must recognize gain only up to the the fair market value of the other property he receivee Also, If the shareholder contributes its own stock to the corp in exchange for a
corp interest or the corp later exchanges the stock in a taxable
transaction, then the corp will realize gain that will be allocated to the shareholder; however, the corporate shareholder will not recognize the gain allocated to it with respect to the sale or exchange of the stock.



However, UNLIKE a n S corp or an LLC, the SALE of assets in a C corp is subject to taxation at C corp rates, ranging from 15% to 35% federal tax rate;under general tax principles, when the shareholder, as aTP, disposes of pty, gian or loss is recognized on the difference between the FMV what the TP receives and the basis of the disposed pty. UNLESS sec 351 is applied.

Would it make any difference if he say only traded half the stock and still held a position in the C corp=====>>Same as above UNLESS he sells the exchanged pty



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