This year C and D formed a new corporation.C and D both contributed appreciated property, receiving 90 and 10 shares of the corporation's stock respectively.

Question

Quizplus · Accepted Answer

Under Section 351 of the Internal Revenue Code, no gain or loss is recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation, and immediately after the exchange, such person or persons are in control (meaning ownership of at least 80% of the stock) of the corporation. Since C and D together control 100% of the corporation immediately after the exchange, neither must recognize gain on the transfer of appreciated property for stock.

This Year C and D Formed a New Corporation