Discussion:Section 354 and "excess principal"
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Discussion Forum Index --> Tax Questions --> Section 354 and "excess principal"
| 2 June 2008 | |
| Does section 354 mean that if an individual owns shares of a company A (a C-corp) and company A is being taken over by company B by a stock exchange then the transfer of shares of company A stock for company B stock is a tax free exchange? How does the "excess principal" come into play? What would constitute this excess principal? | |
| 2 June 2008 | |
| If securities (such as bonds) are being exchanged for securities as part of the reorganization, as long as the principal remains the same, there would be no gain on the exchange of securities. If bonds with a principal amount of 100 are being exchanged for bonds with a principal amount of 120, then gain would be recognized. | |
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