Part 2 C Corporations question: corporation immediately afterward

Part 2C Corporations

For a transfer of property to a corporation to be tax-free under section 351, the transferors must control the corporation immediately afterward, meaning they own at least:

A 100% of every class of stock outstanding after the transfer
B More than 50% of the voting stock and 50% of the value
C 50% of the value of all stock
D 80% of the voting power and 80% of each other class of stock

Show the answer and explanation

Answer: D. 80% of the voting power and 80% of each other class of stock

Control for section 351 means owning at least 80% of the total combined voting power of all classes of voting stock and at least 80% of the total number of shares of all other classes, measured immediately after the exchange and counting all transferors of property together. Persons who contribute only services are not counted as transferors. Source: IRC 351(a), 368(c); Pub. 542 (Rev. 01-2024), Property Exchanged for Stock. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Using a 50% control test.

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