§362 Basis to Corporations

Summary

Sets rules for how a corporation figures the tax basis of property it gets in certain transfers. When a corporation receives property in a tax-free exchange (like a transfer to a corporation controlled by the transferor), as paid-in surplus or a capital contribution, or because of a corporate reorganization, the corporation generally takes the same tax basis the transferor had, plus any gain the transferor had to report on the transfer. If the property received is stock or securities in a party to the reorganization, special limits apply unless it was exchanged for the new corporation’s stock. Gives special limits and exceptions. If someone who is not a shareholder gives property as a capital contribution, the corporation’s basis in that property is zero. If non-shareholder money is contributed, the basis of property bought with that money during the 12-month period after receipt must be reduced by that contribution, and any leftover reduces basis of other property as of the end of that period (allocation rules are set by Treasury). A basis cannot be raised above the property’s fair market value because of assumed liabilities. Rules also stop “importing” built-in losses: if a transfer would bring in a net built-in loss, the affected property’s basis is set to fair market value, with special limits, allocations, and an optional irrevocable election (under Treasury rules) to shift the limit to the transferor’s stock basis.