M incorporated her proprietorship this year.After receiving all of the stock of her new corporation, she immediately transferred 30 percent of the stock to her sister.M's exchange is not taxable even though she retained control only briefly after the exchange.

Question

Quizplus · Accepted Answer

This is considered a transfer to a related party, which is generally not taxable as long as the transferor retains control of the corporation immediately after the exchange. In this case, M did retain control briefly after transferring 30% of the stock to her sister, so there is no taxable event.

M Incorporated Her Proprietorship This Year