Video Summary

Section 351 of the Internal Revenue Code describes a tax-deferred exchange. This means that if you contribute property to a corporation in exchange for stock, and you and other transferors control the corporation immediately after the exchange, generally no gain or loss is recognized. "Control" typically means owning at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock. The property contributed can include a wide range of assets such as cash, securities, and real estate. However, there are exceptions; for instance, if the exchange involves the receipt of debt as part of the transaction, this can trigger a taxable event. Additionally, the IRS scrutinizes transactions to ensure they're not solely intended for tax avoidance. Careful planning and documentation are essential when utilizing a Section 351 exchange to ensure compliance and avoid unexpected tax consequences. It's crucial to consult with a tax professional for guidance, as the complexities of Section 351 can be quite intricate.