Doron Narotzki and Melanie McCoskey of The George W. Daverio School of Accounting, have made available for download their article, “The Code Section 267 Related Party Rules: When Do They Apply to Section 351 Transactions?”, published in Journal of Taxation, Volume 136, Number 02, February 2022. The abstract is as follows:
Code Section 351 states that property transferors do not recognize gain or loss when they have control of the corporation immediately after the exchange. If the control requirements are not met, any realized loss that would be allowed under Code Section 351 may be disallowed under the Code Section 267 related party rules. One question that has not been addressed clearly in any primary source of authority is the proper time for testing to determine whether the related party rules apply. This article attempts to provide a review of the relevant legislation and court cases in order to provide guidance on this issue.
Posted by Mallory Wentz, Associate Editor, Wealth Strategies Journal.