25 May Question 1. Similar to the likekind exchange provision, § 351 can be partly ju
Question
1. Similar to the likekind exchange provision, § 351 can be partly justified under the wherewithal to pay concept.
a. True
b. False
2. Similar to likekind exchanges, the receipt of “boot” under § 351 can cause loss to be recognized.
a. True
b. False
3. Tina incorporates her sole proprietorship with assets having a fair market value of $100,000 and an adjusted basis of $110,000. Even though § 351 applies, Tina may recognize her realized loss of $10,000.
a. True
b. False
4. In a § 351 transfer, a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000. Only $7,000 of the boot will be taxed to the shareholder.
a. True
b. False
5. A taxpayer may neverrecognize a loss on the transfer of property in a transaction subject to § 351.
a. True
b. False
6. If a transaction qualifies under § 351, any recognized gain is equal to the value of the boot received.
a. True
b. False
7. Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for 85% of the stock of Heron Corporation. In addition, he receives cash of $40,000. Allen recognizes a capital gain of $40,000 on the transfer.
a. True
b. False
8. When consideration is transferred to a corporation in return for stock, the definition of “property” is important because tax deferral treatment of § 351 is available only to taxpayers who transfer property.
a. True
b. False
9. The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.
a. True
b. False
10.Gabriella and Maria form Luster Corporation with each receiving 50 shares of its stock. Gabriella transfers cash of $50,000, while Maria transfers a proprietary formula (basis of $0; fair market value of $50,000). Neither Gabriella nor Maria will recognize gain on the transfer.
a. True
b. False
11.Because services are not considered property under § 351, a taxpayer must report as income the fair market value of stock received for such services.
a. True
b. False
12.For § 351 purposes, stock rights and stock warrants are included in the definition of “stock.”
a. True
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