Hello:
I'm working on my first sec 351 transfer and wanted to get some feedback on my assumptions.
Facts:
1 owns 99% of A (an S-Corp), and 2 owns 1% of A. 1 and 2 want to setup X Holding Company (also an S-Corp), and then transfer their assets in A in exchange for stock in X. It is TBD whether A will remain an S-Corp after acquisition.
Scenario 1:
1 will get 99% of the stock of X, and 2 will get 1% of the stock of X. After the assets of A are transferred to X in exchange for stock, no gain\loss will be recognized.
Scenario 2:
1 will get 50% of the stock of X, and 2 will get 50% of the stock of X. After the assets of A are transferred to X in exchange for stock, gain\loss will need to be computed as 1 is essentially selling stock to 2.
Are my assumptions here correct?
If so, are there any strategies we could utilize to essentially move 2 from a 1% owner to a 50% owner, without triggering a taxable event?
I'm working on my first sec 351 transfer and wanted to get some feedback on my assumptions.
Facts:
1 owns 99% of A (an S-Corp), and 2 owns 1% of A. 1 and 2 want to setup X Holding Company (also an S-Corp), and then transfer their assets in A in exchange for stock in X. It is TBD whether A will remain an S-Corp after acquisition.
Scenario 1:
1 will get 99% of the stock of X, and 2 will get 1% of the stock of X. After the assets of A are transferred to X in exchange for stock, no gain\loss will be recognized.
Scenario 2:
1 will get 50% of the stock of X, and 2 will get 50% of the stock of X. After the assets of A are transferred to X in exchange for stock, gain\loss will need to be computed as 1 is essentially selling stock to 2.
Are my assumptions here correct?
If so, are there any strategies we could utilize to essentially move 2 from a 1% owner to a 50% owner, without triggering a taxable event?