Proportionate liquidating distribution
No gain is recognized by you, Bill, or the corporation. You and Bill transfer the property with a basis of 0,000 to a corporation in exchange for stock with a fair market value of 0,000.
This represents only 75% of each class of stock of the corporation. You and Bill recognize a taxable gain of 0,000 on the transaction. You transfer property worth ,000 and render services valued at ,000 to a corporation in exchange for stock valued at ,000.
Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid.
Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange.
This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated.
A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange.
If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain.
You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. Immediately after the transfer, you control the corporation. Your adjusted basis in the transferred property is ,000.
It also applies whether the corporation is being formed or is already operating. Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange.Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.Also see the Instructions for Form 1120 or the applicable instructions for the corporation’s tax return. Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts.An LLC can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable.