EA Part 2 · Business Entities
An individual transfers appreciated real estate to an existing corporation solely in exchange for 25% of its stock in a standalone transaction. How is this transfer treated for federal income tax purposes?
- A.As a tax-deferred like-kind exchange
- B.As a fully taxable exchange
- C.As a fully nontaxable exchange
- D.As an ordinary dividend distribution
Show answer and explanation
Answer: B
Section 351 requires control immediately after the exchange. A sole transferor holding only 25% after this standalone exchange does not meet the control test.
