When a corporation is formed,if the sole shareholder contributes property and receives,in return,stock plus property,the individual will report a taxable gain equal to the FMV of the property received.

Question

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The individual will not report a taxable gain as long as the transaction qualifies for non-recognition of gain under Section 351 of the Internal Revenue Code, which generally requires that the person(s) transferring property to the corporation must control the corporation immediately after the exchange.

When a Corporation Is Formed,if the Sole Shareholder Contributes Property