Code Section 351 Clause Samples
Code Section 351 is a provision in the Internal Revenue Code that allows shareholders to transfer property to a corporation in exchange for stock without recognizing a gain or loss, provided certain requirements are met. Specifically, this applies when one or more persons transfer property to a corporation and, immediately after the exchange, those persons are in control of the corporation. For example, if several individuals contribute cash or assets to form a new corporation and receive stock in return, they generally do not have to pay taxes on any gain from the transfer at that time. The core function of this clause is to facilitate the formation and capitalization of corporations by deferring tax consequences, thereby encouraging business growth and investment.
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Code Section 351. Assignee and Assignor shall each use their best efforts to cause the contribution of the Oil and Gas Properties and issuance of Common Stock and Preferred Stock to the Assignee as an exchange described at Sections 351(a) and (b) of the Internal Revenue Code of 1986, as amended (the “Code”), and this Agreement should be interpreted to cause the contributions of the Oil and Gas Properties by Assignor to Assignee in exchange for the Common Stock and Preferred Stock of Assignee to be described at Sections 351(a) and (b) of the Code, such that no gain or loss will be recognized by the Assignor to the extent they receive stock within the meaning of Section 351(a) of the Code.
Code Section 351. The CTB Election is intended for U.S. federal income tax purposes to qualify with respect to the Member as a tax deferred contribution under Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state and local income tax provisions, as of the Effective Tax Time. Unless directed otherwise by a governmental authority, the Member and the Corporation shall report the incorporation pursuant to the CTB Election on a basis consistent with Code Section 351, the regulations thereunder and Treasury Regulations Section 301.7701-3(c)(1)(i).