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Parent Corp Forming Subsidiary Corp

Asked by: Matthew - 21 November, 2011
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/default.png-f1597c1da25f30f8c1a941405e8391c8 A hypothetical C-corporation operates as a real estate holding company. Could that corporation itself then form a subsidiary c-corporation, and turn over the properties to the subsidiary as the initial investment/stock purchase?
Answered by: Roman Fichman, Esq. - 21 November, 2011
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/441.jpg-afd0fd6c303e291a6b8e74727d4f86a1 Matthew,

It is not clear what is meant by "turn over the properties to the subsidiary". It is possible to transfer/sell parent corporation's assets to the subsidiary in exchange for the subsidiary's stock. One should be concerned with the tax implications of such a transaction and the treatment of both corporations as standalone companies especially if the subsidiary is wholly owned by the parent and the parent is left without any assets other than the stock of the subsidiary.

You should consult with an attorney and an accountant with respect to the contemplated transaction. If you have any further questions feel free to contact my office at your convenience.

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