Identify Which of the Following Statements Is True

question 50

Multiple Choice

Identify which of the following statements is true.

• A)The transferee corporation's acquisition or assumption of liabilities in excess of the total adjusted bases of the properties transferred by a transferor results in a gain recognition by the transferor.
• B)When a transferor exchanges a mortgaged property under Sec. 351 and the amount of the mortgage is greater than the transferor's basis in the property, the transferor's basis in the stock received will be equal to the basis the transferor had in the mortgaged property.
• C)When forming a corporation, the accounts payable of a transferor's business are not liabilities for gain computation purposes if the transferor's business uses the accrual method of accounting.
• D)All of the above are false.

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Definitions:

Book Value

Book value is the net value of a company's assets minus its liabilities, as recorded on the balance sheet, often used to assess if a stock is under or overvalued by comparing to its market value.

Market-to-Book Ratio

A ratio used to compare a company's current market price to its book value, indicating the value placed on the company by the stock market.

Book Value

Represents the net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.

Fixed Assets

Long-term tangible assets, such as buildings and machinery, used in operating a business and not expected to be consumed or converted into cash within a year.