Question

In: Accounting

1. Services are considered property for purposes of Code Sec. 351. T or F 2. A...

1. Services are considered property for purposes of Code Sec. 351. T or F

2. A loss in control shortly after transfer could cause a transaction to fail to qualify under Code Sec. 351. T or F

3. Shareholders will recognize gain on a capital contribution merely because they are minority shareholders. T or F

4. All liabilities transferred in a Code Sec. 351 exchange are treated as boot for purposes of gain recognition. T or F

5. Liabilities that would give rise to a deduction when paid are excluded when determining the amounts of liabilities assumed by a corporation. T or F

6. If property with a built-in loss is transferred to a corporation in a Code Sec. 351 transaction, then the corporation's basis in such property is limited to the property's fair market value. T or F

7. The corporation's holding period for a property received in a Code Sec. 351 transaction includes the holding period of the shareholder. T or F

8. The receipt of boot in a Code Sec. 351 transfer precludes any nonrecognition treatment. T or F

9. When a local government contributes property without a pre-approved plan to a corporation as an inducement, the fair market value of the property is included in gross income of the corporation. T or F

10. An advantage of a corporation issuing debt is that interest payments are ordinary income to the debt holder. T or F

Solutions

Expert Solution

1) Services are considered property for purposes of Code Sec. 351 Ans: False

(services are excluded from the definition of property as its not an intangible asset)

2) A loss in control shortly after transfer could cause a transaction to fail to qualify under Code Sec. 351

Ans: True -> could cause the transaction to fail to qualify under Code Sec. 351. If the loss of control was due to the disposition of stock according to a prearranged plan, the transferors will not, in most cases, have control immediately after the exchange.

3)Shareholders will recognize gain on a capital contribution merely because they are minority shareholders

Ans: True

4)All liabilities transferred in a Code Sec. 351 exchange are treated as boot for purposes of gain recognition

Ans: False as per section 351 its not treated as boot for gain recognition

5) Liabilities that would give rise to a deduction when paid are excluded when determining the amounts of liabilities assumed by a corporation.

Answer: True

6)If property with a built-in loss is transferred to a corporation in a Code Sec. 351 transaction, then the corporation's basis in such property is limited to the property's fair market value.

Anwer: True -> such property is limited to the fair market value of the transferred property

7) The corporation's holding period for a property received in a Code Sec. 351 transaction includes the holding period of the shareholder

Answer: True. yes t,he corporation takes over the holding period that the shareholder had in the property he/she transferred to the corporation under a Section 351 exchange

8) The receipt of boot in a Code Sec. 351 transfer precludes any nonrecognition treatment

Answer: true

9)When a local government contributes property without a pre-approved plan to a corporation as an inducement, the fair market value of the property is included in gross income of the corporation

answer: true yes Fair market value of the property will consider

10)An advantage of a corporation issuing debt is that interest payments are ordinary income to the debt holder

answer: true. yes interest pament is an income to the debt holder

ekkarill92 answered 1 year ago

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