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c corporation issuing stocks for new shareholders

Technical topics regarding tax preparation.
#1
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we got a client set up as a LLC and elected as a C corporation to file taxes. Client originally contributed 100k for 100% ownership for the LLC. Recently, the LLC has a new investor to contribute 120k to the LLC (Elected as C corp) for 50% ownership. Does the original shareholder needs to recognize any gain or this is a tax free contribution under IRC 351.
 

#2
Nilodop  
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Either way he doesn't recognize income.

It may or may not be a 351 transaction. For instance, how much time elapsed between the 2 investments?
 

#3
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Original shareholder contributed the capital over the 2 years period up to recent. The new potential shareholder would like to contribute additional 120k for 50%.
 

#4
Nilodop  
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As I said, it doesn't matter. It can be argued that 351 applies or does not apply. The first s/h has no income. The new s/h has no income. The corp. has no income.

Unless, of course, you sneak some new facts in on us. Such as the first guy takes some cash out right after the second guy puts cash in. Or the second guy's investment is in property other than money. Or the second guy is a relative and the FMV of 50% is way less than 120k. Or whatever.

If you want to jack up the fees in the guise of extremely cautious compliance, tell them you need to help them follow reg. 1.351-3. https://www.law.cornell.edu/cfr/text/26/1.351-3
 

#5
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got it, thanx a lot nil.
 

#6
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"...and elected as a C corporation to file taxes," writes sammy. Out of curiosity, I guess, I ask how that election was made. And were there shares of stock issued - by whom or what? - to the new shareholder for his ownership?
 

#7
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8832 election was done prior to this new owner, LLC does not issue stocks i think. It does need to file some paper with State per security law.
 

#8
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"...LLC does not issue stocks i think."

For $120,000, I hope the new owner got more than just a wink and a handshake... :)
 


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