Which of the Following Statements Best Describes the Tax Consequences

question 19

Multiple Choice

Which of the following statements best describes the tax consequences that arise from a contribution of capital to a corporation by an existing shareholder?

• A)The shareholder recognizes gain and loss on the transfer and the corporation's basis in the property transferred equals its fair market value.
• B)The shareholder does not recognize gain and loss on the transfer and the corporation's basis in the property transferred equals the shareholder's basis in the property transferred.
• C)The shareholder recognizes gain and loss on the transfer and the corporation's basis in the property transferred equals the shareholder's basis in the property transferred.
• D)The shareholder does not recognize gain and loss on the transfer and the corporation's basis in the property transferred equals zero.

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Definitions:

Industry

A sector of the economy that is comprised of businesses and organizations that engage in similar types of production, services, or activities.

First-In, First-Out Method

An inventory valuation method where the goods first received are the first to be sold or used.

Process Costing

An accounting method used to allocate production costs to units of output, suitable for industries producing homogeneous products.

Mixing Department

A specific area or segment of the manufacturing process where raw materials are combined or processed to create a mixture or product.