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:

Mechanism

The detailed process or pathway by which a chemical reaction occurs, including the step-by-step sequence of elementary reactions.

Carbon Tetrachloride

A volatile, colorless liquid with a slightly sweet smell, historically used in fire extinguishers and as a solvent, but now known to be a harmful carcinogen.

Mechanistic Steps

The sequential individual reactions or movements of electrons that occur during the course of a complex chemical reaction.

Chloromethane

A colorless, flammable gas with a mild sweet odor, used in manufacturing and as a refrigerant; its chemical formula is CH3Cl.