The Code Section 267 Related Party Rules: When Do They Apply to Section 351 Transactions?
Journal of Taxation, Volume 136, Number 02, February 2022
3 Pages Posted: 17 Mar 2022 Last revised: 1 Jun 2022
Date Written: January 19, 2022
Abstract
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.
Keywords: Code Section 351, Code Section 267
JEL Classification: K34
Suggested Citation: Suggested Citation