In: Accounting
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
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