Section 351 or 354 or Section 721?

I would like to transfer publically traded stocks (like
Intel) from a personally titled Ameritrade account into a
new Partnership (LLC) account with Ameritrade. So long as I
maintain a majority control over the Partnership by
receiving the proper percentage of membership interest in
the LLC for the current market value of the stock
transferred, it is my belief that this would not be
considered a taxable event by the IRS under either Section
721, Section 351, or Section 354. My personal basis on
each stock investment would therefore transfer to the LLC
and become the cost basis for each investment that the LLC
owns.

The LLC will hold these investments long-term (possibly make
some new purchases with cash) and potentially (yet rarely)
sell and re-invest in other stocks (asset re-allocation).
In a sense, this would be an "investment company / LLC /
partnership". Section 721 and 351 makes note of an
exception to the rule referring to an "investment company"
(as defined in Section 351).

Also, publically held stock may be considered an
"intangible" asset. Could you please explain whether section
(d) of Section 721 ("Transfers of intangibles") needs to be
considered in regards to this transfer in order to keep it a
non-taxable transfer?

Thanks,
-David

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Reply to
David
The partnership basis will be FMV on the date of contribution, not your cost basis. Any pre-contribution gain must be recognized by you when the security is sold. Pre-contribution losses are more complex.
Reply to
Brian
I disagreed with the previous posting. Generally contribution to a partnership is tax-free and therefore the basis in the partneship interest (outside basis) is the carryover over basis in the property contributed plus pro-rata share of liabilities assumed. Sec.721. There may be build-in gain in the property that is required to be recognized upon certain conditions. Additionally, I was wondering why Sec.351 is mentioned. 351 governs contributions to corporations only. Contribution to the LLC that is a single member LLC is igrnored since such LLC is disregarded from its owner. I assume the LLC Partnership discussed above is an LLC with two owners.
Reply to
aufein
An LLC can elect to be taxed as a partnership (or proprietor if only one owner), or as a corporation. If taxed as a corporation section 351 would certainly be a factor.
Because only a two (or more) member LLC is a legitimate entity? Perhaps in some states, but not in California. Stu
Reply to
Stuart A. Bronstein

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