Similar to the like-kind exchange provision, § 351 can be partly justified under the wherewithal to pay concept.

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Section 351, which allows for the tax-free transfer of property to a corporation by one or more persons in exchange for stock, can be partly justified under the wherewithal to pay concept because the transferors do not receive cash or other liquid assets in the exchange, and thus may not have the immediate financial ability to pay tax on any gain realized.

Similar to the Like-Kind Exchange Provision, § 351 Can Be