Common use of Post-conversion contribution Clause in Contracts

Post-conversion contribution. Y is a C corporation that elects to become an S corporation on January 1, 1996. On that date, Y owns (among other assets) Blackacre with a basis of $100,000 and a value of $200,000. On January 1, 1998, when Blackacre has a basis of $100,000 and a value of $200,000, Y contrib- utes Blackacre to partnership P for a 50 per- cent interest in P. On January 1, 2000, P sells Blackacre for $300,000 and recognizes a gain of $200,000 on the sale ($300,000¥$100,000 = $200,000). P is allocated $100,000 of the gain under section 704(c), and another $50,000 of the gain for its fifty percent share of the re- mainder, for a total of $150,000. Under this paragraph and section 1374(d)(3), if Y estab- lishes that P’s gain would have been only $100,000 ($200,000¥$100,000 = $100,000) if Blackacre had been sold on the first day of the recognition period, Y would treat only $100,000 as a partnership 1374 item.

Post-conversion contribution. Y is a C corporation that elects to become an S corporation on January 1, 1996. On that date, Y owns (among other assets) Blackacre with a basis of $100,000 and a value of $200,000. On January 1, 1998, when Blackacre has a basis of $100,000 and a value of $200,000, Y contrib- utes Blackacre to partnership P for a 50 per- cent interest in P. On January 1, 2000, P sells Blackacre for $300,000 and recognizes a gain of $200,000 on the sale ($300,000¥$100,000 = $200,000300,000¥$100,000=$200,000). P is allocated $100,000 of the gain under section 704(c), and another $50,000 of the gain for its fifty percent per- cent share of the re- mainderremainder, for a total of $150,000. Under this paragraph and section 1374(d)(3), if Y estab- lishes establishes that P’s gain would have been only $100,000 ($200,000¥$100,000 = $100,000200,000¥$100,000=$100,000) if Blackacre had been sold on the first day of the recognition period, Y would treat only $100,000 as a partnership part- nership 1374 item.