Why Would a Transferor Want to Avoid the Nonrecognition of Gain

question 43

Essay

Why would a transferor want to avoid the nonrecognition of gain under Sec. 351? How can the nonrecognition provision of Sec. 351 be avoided?

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Definitions:

After-Tax Discount

The reduction or deduction from the gross amount on which tax has already been calculated and deducted.

Working Capital

The gap between a firm's current assets and its current liabilities, signifying the available liquidity for operating its business activities.

Incremental Sales

The additional revenue generated from an increase in sales activities or volume above a baseline level.

Cash Operating Expenses

Expenses that a company pays out in cash during an accounting period, excluding non-cash expenses like depreciation.