[Code of Federal Regulations]
[Title 26, Volume 4]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.351-3]

[Page 184-185]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.351-3  Records to be kept and information to be filed.

    (a) Every person who received the stock or securities of a 
controlled corporation, or other property as part of the consideration, 
in exchange for property under section 351, shall file with his income 
tax return for the taxable year in which the exchange is consummated a 
complete statement of all facts pertinent to such exchange, including--
    (1) A description of the property transferred, or of his interest in 
such property, together with a statement of the cost or other basis 
thereof, adjusted to the date of transfer.
    (2) With respect to stock of the controlled corporation received in 
the exchange, a statement of--
    (i) The kind of stock and preferences, if any;
    (ii) The number of shares of each class received; and
    (iii) The fair market value per share of each class at the date of 
the exchange.
    (3) With respect to securities of the controlled corporation 
received in the exchange, a statement of--
    (i) The principal amount and terms; and
    (ii) The fair market value at the date of exchange.
    (4) The amount of money received, if any.
    (5) With respect to other property received--
    (i) A complete description of each separate item;
    (ii) The fair market value of each separate item at the date of 
exchanges; and
    (iii) In the case of a corporate shareholder, the adjusted basis of 
the other property in the hands of the controlled corporation 
immediately before the distribution of such other property to the 
corporate shareholder in connection with the exchange.
    (6) With respect to liabilities of the transferors assumed by the 
controlled corporation, a statement of--
    (i) The nature of the liabilities;
    (ii) When and under what circumstances created;
    (iii) The corporate business reason for assumption by the controlled 
corporation; and
    (iv) Whether such assumption eliminates the transferor's primary 
liability.
    (b) Every such controlled corporation shall file with its income tax 
return for the taxable year in which the exchange is consummated--
    (1) A complete description of all the property received from the 
transferors.
    (2) A statement of the cost or other basis thereof in the hands of 
the transferors adjusted to the date of transfer.
    (3) The following information with respect to the capital stock of 
the controlled corporation--
    (i) The total issued and outstanding capital stock immediately prior 
to and immediately after the exchange, with a complete description of 
each class of stock;
    (ii) The classes of stock and number of shares issued to each 
transferor in the exchange, and the number of shares of each class of 
stock owned by each transferor immediately prior to and immediately 
after the exchange, and
    (iii) The fair market value of the capital stock as of the date of 
exchange which was issued to each transferor.
    (4) The following information with respect to securities of the 
controlled corporation--
    (i) The principal amount and terms of all securities outstanding 
immediately prior to and immediately after the exchange,
    (ii) The principal amount and terms of securities issued to each 
transferor in the exchange, with a statement showing each transferor's 
holdings of securities of the controlled corporation immediately prior 
to and immediately after the exchange,
    (iii) The fair market value of the securities issued to the 
transferors on the date of the exchange, and
    (iv) A statement as to whether the securities issued in the exchange 
are subordinated in any way to other claims against the controlled 
corporation.
    (5) The amount of money, if any, which passed to each of the 
transferors in connection with the transaction.
    (6) With respect to other property which passed to each transferor--
    (i) A complete description of each separate item;

[[Page 185]]

    (ii) The fair market value of each separate item at the date of 
exchange, and
    (iii) In the case of a corporate transferor, the adjusted basis of 
each separate item in the hands of the controlled corporation 
immediately before the distribution of such other property to the 
corporate transferor in connection with the exchange.
    (7) The following information as to the transferor's liabilities 
assumed by the controlled corporation in the exchange--
    (i) The amount and a description thereof,
    (ii) When and under what circumstances created, and
    (iii) The corporate business reason or reasons for assumption by the 
controlled corporation.
    (c) Permanent records in substantial form shall be kept by every 
taxpayer who participates in the type of exchange described in section 
351, showing the information listed above, in order to facilitate the 
determination of gain or loss from a subsequent disposition of stock or 
securities and other property, if any, received in the exchange.

              effects on shareholders and security holders