I’m Daniel Winters, and I’m a tax accountant.

The author’s analysis @adrewski is COMPLETELY INCORRECT, and will likely result in additional tax due, NOT savings.

Under Internal Revenue Code Section 362(a)(2), the property contributed to the corporation has the SAME COST BASIS as for the individual who contributed the property! So, now the gain would be taxed at the 35% corporate tax rate. Individual tax rates for long term cap gains are 15% or 20%. So, this could easily result in paying 35% tax, instead of 15% or 20%.

Please DO NOT carry out a transaction as recommended by the author of this post under any circumstances. Honestly, is it realistic that you could just contribute appreciated property to a corporation, then the gain magically disappears? That is NOT how it works. Daniel Winters, M.S. Taxation. Link and quotes from Internal Revenue Code below.

https://www.law.cornell.edu/uscode/text/26/362

(a)PROPERTY ACQUIRED BY ISSUANCE OF STOCK OR AS PAID-IN SURPLUS

If property was acquired by a corporation—
(1)
in connection with a transaction to which section 351 (relating to transfer of property to corporation controlled by transferor) applies, or
(2)
as paid-in surplus or as a contribution to capital,

then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer.

(b)TRANSFERS TO CORPORATIONS

If property was acquired by a corporation in connection with a reorganization to which this part applies, then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain recognized to the transferor on such transfer.