If a Shareholder Transfers Liabilities to a Corporation in a Sec

question 124

True/False

If a shareholder transfers liabilities to a corporation in a Sec. 351 transfer, there is no effect on the corporation's stock basis due to the corporation's assumption of liabilities.

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Definitions:

Proper Business Purpose

A proper business purpose is a motive or reason for conducting business activities that is legal, ethical, and within the bounds of corporate governance standards.

Restatement Test

A guideline used in legal contexts to determine the interpretation or application of laws, often referencing the Restatements of the Law—a series of treatises on various legal subjects.

Liability for Negligence

Legal responsibility for harm caused by failing to act as a reasonable person would, resulting in damage or injury to another.

Third-Party Users

Individuals or entities that are not directly involved in a contract or transaction but who may be affected by it or have rights or obligations arising from it.