Which of the Following Statements Best Describes the Tax Consequences

question 78

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 sole shareholder?

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

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Definitions:

Buyers

Individuals or entities that purchase goods or services from the market for consumption or use.

Tax

Mandatory financial charges imposed by a government on individuals, corporations, or additional legal entities to fund public expenditures.

Price

The monetary value or amount that must be given in exchange for a good or service.

Tax

Mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.