What are the conditions for incorporation loss relief?

Incorporation loss relief allows businesses to utilize certain losses when transitioning from a sole proprietorship or partnership into a corporate structure. The correct condition for this relief is that the business must be transferred to a company in exchange for shares. This allows the business owner to carry forward any losses sustained prior to the incorporation, depending on the specific terms of the transfer.

This process is typically governed by tax legislation that recognizes the need for continuity in the treatment of trading losses when a business is incorporated. By transferring the business to a company in exchange for shares, owners can ensure their losses can potentially be used to offset future corporate profits, thus providing a financial benefit and encouraging business growth.

The other conditions mentioned, such as requiring the business to have been operating for a specific period, transferring the business to an individual, or restrictions based on the percentage of total assets, are not relevant to the foundational requirement for incorporation loss relief. This highlights why condition C is the key aspect concerning loss relief in the context of incorporation.