What is a zero basis?
Zero-basis receivables are uncollected receivable balances that have not yet been included in taxable income because your business uses cash-method accounting for tax purposes.
What is a 357c gain?
An exception to tax-free treatment is contained in section 357(c), which generally provides that a transferor in a section 351 transaction recognizes gain to the extent that any liabilities assumed by the corporation on the transfer exceed the transferor’s aggregate adjusted basis in the assets transferred.
Is assumption of debt taxable?
351, the transfer of debt (or the transfer of property subject to debt) is not a taxable event (Sec. 357(a)). The transfer of debt to a corporation will create a taxable event in these three situations: The transfer is made to avoid tax (Sec.
When determining the shareholder basis of stock received for property in a 351 transaction?
351, the transferors obtain basis in the stock of the transferee corporation equal to the basis of all property exchanged: (1) decreased by the fair market value (FMV) of any boot received and the amount of loss recognized on the exchange; and (2) increased by the amount treated as a dividend, if any, and the amount of …
Is Basis taxed?
Basis is generally the amount of your capital investment in property for tax purposes. Use your basis to figure depreciation, amortization, depletion, casualty losses, and any gain or loss on the sale, exchange, or other disposition of the property. In most situations, the basis of an asset is its cost to you.
What is a section 351 statement?
Section 351(a) provides that no gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation and immediately after the exchange such person or persons are in control (as defined in § 368(c)) of the corporation.
How much stock must one company own in control of another?
Sec. 368(c) defines control as the ownership of stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation.
What is the control requirement of section 351?
How does the IRS know your cost basis?
With the single-category method, you add up your total investment in the fund (including all those bits and pieces of reinvested dividends), divide it by the number of shares you own, and voila, you know the average basis. That’s the figure you use to calculate gain or loss on sale.
Why is my cost basis Zero?
Yes, if you are certain you didn’t pay anything for these shares, then you can enter “0” as the Cost Basis. Before doing this, check with your employer’s payroll department and make sure that the company did not include any “cost” for these shares in your taxable income (Box 1 of your Form W-2).