In terms of justification and effect 351transfers to a cont

In terms of justification and effect, & 351(transfers to a controlled corporation) and & 1031(like-kind exchanges) are much alike. explain.

Solution

Both section 351 and 1031 provide for nonrecognition of gain or loss for transfer which would be taxable. The principle behind the nonrecognition of gain or loss is the continuity of investment by taxpayer. As there is no change in economic status of taxpayer’s, gain or loss should be delayed until a change occurs. In addition, this approach can be justified.