Question

A taxpayer must receive voting common stock to be eligible for deferral in a Section 351 exchange. True False

Answer 1

True

Step-by-step explanation:

Section 351 (a) establishes that no gain or loss should be recognized when property is transferred to a corporation:

• in exchange of stock in that corporation (might receive common stock or share class stocks)
• as soon as the exchange is complete, the new stockholder must be in control of the corporation.

Not all common stocks have the same voting rights, that is why they are divided into share classes which assign separate voting rights or powers. Section 351 does not include preferred stocks.