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:

Interest Income

Earnings received from investments in financial assets like savings accounts, certificates of deposit, or bonds, typically expressed as a percentage of the principal.

Aggregate Demand

The aggregate need for every product and service in an economy, measured at a specific overall price level during a certain time frame.

Long-run Output

The maximum amount of goods and services an economy can produce when it fully utilizes its resources, typically considered over a period where all inputs can be adjusted.

Costs of Inflation

The negative impacts of inflation, such as reduced purchasing power, uncertainty in the economy, and the possible distortion of investment and savings decisions.