Sofia forms Lark Corporation with a transfer of appreciated property in exchange for all of its shares. Shortly thereafter, she transfers half her shares to her son, Ted. The later transfer to Ted could cause the original transfer to be taxable.

Question

Quizplus · Accepted Answer

The transfer of shares to Ted could be seen as part of a prearranged plan to give Ted an interest in the property, potentially disqualifying Sofia from the nonrecognition of gain treatment typically available for transfers of property to a corporation in exchange for its stock under Section 351 of the Internal Revenue Code.

Sofia Forms Lark Corporation with a Transfer of Appreciated Property