§751 Hot Assets - does it apply to LLC taxed as S corp?

[BulldogTom]

Company X (SMLLC taxed as S Corp) is re-organizing and will be selling inventory to newly created SMLLC Y & Z(taxed as S Corp).   All three entities have the same ownership.  I don't think §751 applies since it is not a partnership.   

Can anyone confirm?

Tom
Longview, TX

[DANRVAN]

34 minutes ago, BulldogTom said:

Company X (SMLLC taxed as S Corp) is re-organizing and will be selling inventory to newly created SMLLC Y & Z(taxed as S Corp). 

Why are they selling inventory and recognizing income instead of a Type D tax free transfer if ownership is the same?

751 applies to transfers from partnership to partners.  Transfer of corp. assets is an entirely different ball game.

 

[DANRVAN]

1 hour ago, BulldogTom said:

I don't think §751 applies since it is not a partnership.

Sect 751 prevents converting ordinary income to capital gains at the partner level.  It does not apply to corporations since the transfer is a deemed sale to shareholders.

And the situation you described is a direct sale unless Sec. 368(a)(1)(D)) is applied.

[BulldogTom]

1 hour ago, DANRVAN said:

Why are they selling inventory and recognizing income instead of a Type D tax free transfer if ownership is the same?

751 applies to transfers from partnership to partners.  Transfer of corp. assets is an entirely different ball game.

 

They are not asking me....the owner has his reasons.   Thanks for confirming that there is no Hot Asset issue.   Appreciate you.

Tom
Longview, TX

[ILLMAS]

I need to get my mind out of the gutter when I read the topic