Tax code section for transfer of property to a corporation?

Question

Hi, I'm looking for the tax code section which deals with property that isn't a 351 exchange. Basically I'm trying to figure out the tax ramifications of transferring a fully depreciated piece of property to a corporation without any consideration for it (no stock, cash or property). Does the corporation recognize a gain when receiving the property if they pay nothing for it?

Update:

A car that will be used in normal course of business transferred to a C-Corp without any recognition.

Gerald · Accepted Answer

In this situation, where the transfer sounds more like a gift than service income, the corporation would recognize a gain.  The code section I'm thinking of is something like 2500 or 2501 or so (sorry, I'm at home and my copy of the code is at the office).

If it is compensation for services the corporation performed then it would be simple compensation for services under section 61.

Good luck.

? · Answer

What kind of property are you talking about?

Additional Details:

In order to transfer the car to the corporation you have to transfer title from the individual to the corporation.  Most states require a value to be assigned to the auto/truck for tax purposes within tolerances of the Kelly Blue Book value or a certified appraisal.  It this is a working vehicle, you can't put a zero value as this is a fraudulent conveyance.  You also will have problems getting the auto insured by the corporation if the title isn't correctly recorded.

mrreliable3599 · Answer

Property transferred in or out of a corporation goes in and out at fair market value.

You can't just pretend that something of value doesn't have any value.

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Tax code section for transfer of property to a corporation?

3 Answers