Internal Revenue Code:sec. 351. Transfer to Corporation Controlled by Transferor

Sec. 351. Transfer to corporation controlled by transferor

(a) General rule

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 section 368(c)) of the

corporation.

(b) Receipt of property

If subsection (a) would apply to an exchange but for the fact

that there is received, in addition to the stock permitted to be

received under subsection (a), other property or money, then -

(1) gain (if any) to such recipient shall be recognized, but

not in excess of -

(A) the amount of money received, plus

(B) the fair market value of such other property received;

and

(2) no loss to such recipient shall be recognized.

(c) Special rules where distribution to shareholders

(1) In general

In determining control for purposes of this section, the fact

that any corporate transferor distributes part or all of the

stock in the corporation which it receives in the exchange to its

shareholders shall not be taken into account.

(2) Special rule for section 355

If the requirements of section 355 (or so much of section 356

as relates to section 355) are met with respect to a distribution

described in paragraph (1), then, solely for purposes of

determining the tax treatment of the transfers of property to the

controlled corporation by the distributing corporation, the fact

that the shareholders of the distributing corporation dispose of

part or all of the distributed stock, or the fact that the

corporation whose stock was distributed issues additional