Which of the Following Statements Best Describes the Tax Results

question 111

Multiple Choice

Which of the following statements best describes the tax results to a shareholder in a section 351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

• A)Liabilities assumed by a corporation on a section 351 transfer are always treated as boot.
• B)Liabilities assumed by a corporation on a section 351 transfer are never treated as boot.
• C)Liabilities assumed by a corporation on a section 351 transfer are treated as boot if the total liabilities assumed exceed the total basis of the assets transferred.
• D)Liabilities assumed by a corporation on a section 351 transfer are treated as boot if there is no business purpose for the assumption of the liabilities by the corporation.

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Definitions:

Contingency

An event or condition that is possible but cannot be predicted with certainty, often dependent on other events happening.

Conjunct

A conjunct is a component of a compound sentence formed by the logical connective ‘and’, contributing to the compound's overall truth value.

Conjunction

A word used to connect clauses or sentences (in grammar) or the operation in logic that forms a compound statement which is true only if both of its components are true.

Contingency

An upcoming occurrence or condition that has the potential to happen but whose certainty cannot be guaranteed.