How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Richard Your Own Question
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55140
Experience:  29 years of experience as a tax, real estate, and business attorney.
Type Your Tax Question Here...
Richard is online now
A new question is answered every 9 seconds

if an LLC holds stock received thru a Rule 351(a) transaction,

Resolved Question:

if an LLC holds stock received thru a Rule 351(a) transaction, is the stock that is distributed from the LLC to its members a taxable transaction?
Submitted: 5 years ago.
Category: Tax
Expert:  Richard replied 5 years ago.

Good morning. In general, if this is a non-liquidating distribution and the LLC is taxed as a partnership, the distribution of the stock will not be a taxable event, but will simply reduce the recipients' basis in their respective ownership interests in the LLC.



I hope this has given you information that has been helpful to you. I wish you the best of luck!


If you have a follow-up question, please remember that there might be a delay between your follow up questions and my answers because I may be helping others or taking a break.


If I have adequately answered your question, even though the answer might not have been the one for which you hoped, I would appreciate it if you would please click the GREEN ACCEPT button so that I receive credit for my work; otherwise, though you have made a deposit, I do not receive credit.


If you need additional clarification on this question after clicking ACCEPT, please do not hesitate to click Reply and I will be happy to do what I can to help you further. Thanks for allowing me to be of service to you.

Please be aware that the information provided here is not legal advice. Rather it is simply general information. All states have intricacies in their laws and any information given is simply information only and specifically is not intended to be, nor does it constitute, legal advice. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 5 years ago.
Follow up question - the stock that the LLC holds is stock in a publicly traded company, so the stock is an asset that the LLC holds. If the basis for the stock is zero and each of the 3 members agrees to distribute 500,000 shares each to hold in each of their individual names, instead of the LLC holding these shares, would the transaction still be a non-taxable event? I realize that if a member sells this stock once they hold it individually and has a capital gain, then that transaction would be taxed at the current capital rate of 15%.
Expert:  Richard replied 5 years ago.
If these are publicly traded securities, then they are treated as money. A partner generally recognizes gain on a partnership distribution only to the extent any money (and marketable securities treated as money) included in the distribution exceeds the adjusted basis of the partner's interest in the partnership. Any gain recognized is generally treated as capital gain from the sale of the partnership interest on the date of the distribution. If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally does not recognize any gain until the sale or other disposition of the property.
Richard and 2 other Tax Specialists are ready to help you
Customer: replied 5 years ago.
I understand your response above. What if the securities are restricted 144 stock? Does still still equate to "marketable securities treated as money" or not? The restriction will meet its removal requirements on Dec 16, 2011, therefore making the shares marketable on Dec 17, 2011.
Expert:  Richard replied 5 years ago.
At this point, I'll opt out and let another expert help you. Take care.

Related Tax Questions