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

See all articles by Doron Narotzki

Doron Narotzki

University of Akron - The George W. Daverio School of Accountancy

Melanie McCoskey

University of Akron - The George W. Daverio School of Accountancy

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

Narotzki, Doron and McCoskey, Melanie, The Code Section 267 Related Party Rules: When Do They Apply to Section 351 Transactions? (January 19, 2022). Journal of Taxation, Volume 136, Number 02, February 2022 , Available at SSRN: https://ssrn.com/abstract=4013891

Doron Narotzki (Contact Author)

University of Akron - The George W. Daverio School of Accountancy ( email )

259 S. Broadway Akron
Akron, OH 44325-4802
United States

Melanie McCoskey

University of Akron - The George W. Daverio School of Accountancy ( email )

United States

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