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Tax Laws of Transferring Property

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ABC Corp is planning an expansion. Arnold James owns a building that adjoins the current location. With little modification, the restaurant could expand into that building and double its seating capacity. Arnold has owned this property for 10 years during which it has increased in value. Arnold would like to avoid recognizing any gain on the transfer of this property to the corporation. However, the other two shareholders want the corporation to receive the property at its higher value to have a larger depreciation write-off.

They have asked you to review the tax laws regarding a shareholder transferring property to a corporation in return for stock in that corporation. Based on this information, they will determine what is best for the corporation and for Arnold.

Write a one-page memo to the three shareholders discussing the tax laws that govern this type of transfer and make a recommendation regarding the transfer of property for the corporation and owner.

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Solution Summary

This solution of 662 words details specific tax laws that govern the transference of property such as sec.351, 358, and 357. It also gives recommendations on how to safely transfer properties for the shareholder and the corporation.

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ABC Corp is planning an expansion. Arnold James owns a building that adjoins the current location. With little modification, the restaurant could expand into that building and double its seating capacity. Arnold has owned this property for 10 years during which it has increased in value. Arnold would like to avoid recognizing any gain on the transfer of this property to the corporation. However, the other two shareholders want the corporation to receive the property at its higher value to have a larger depreciation write-off.

They have asked you to review the tax laws regarding a shareholder transferring property to a corporation in return for stock in that corporation. Based on this information, they will determine what is best for the corporation and for Arnold.

Write a one-page memo to the three shareholders discussing the tax laws that govern this type of transfer and make a recommendation regarding the transfer of property for the corporation and owner.

Though the transfer of property to the corporation at a higher value leads to larger depreciation write off but such transfer of property have many negative consequences which can be seen when we look at US tax laws.

When a person transfers ...

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