A taxpayer who receives nonvoting stock is not eligible for deferral in a §351 exchange.

Question

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In a §351 exchange, the receipt of nonvoting stock does not disqualify a taxpayer from deferring recognition of gain or loss, as the tax code primarily requires the transfer of property to a corporation in exchange for its stock and immediately afterwards being in control of the corporation, without specifying that the stock must be voting.

A Taxpayer Who Receives Nonvoting Stock Is Not Eligible for Deferral