Which of the Following Statements Best Describes the Tax Results

question 111

Multiple Choice

Which of the following statements best describes the tax results to a shareholder in a section 351 transaction when liabilities on property transferred to the corporation are assumed by the corporation?

• A)Liabilities assumed by a corporation on a section 351 transfer are always treated as boot.
• B)Liabilities assumed by a corporation on a section 351 transfer are never treated as boot.
• C)Liabilities assumed by a corporation on a section 351 transfer are treated as boot if the total liabilities assumed exceed the total basis of the assets transferred.
• D)Liabilities assumed by a corporation on a section 351 transfer are treated as boot if there is no business purpose for the assumption of the liabilities by the corporation.

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Definitions:

Profit Centers

Designated segments within a company for which the managers are responsible for both revenues and expenses, effectively measuring each segment's profitability.

Support Department Allocations

The process of distributing the costs of service departments to producing or operational departments based on their usage or consumption of services.

Minimum Return on Investment

The least amount of profit that an investor deems acceptable when investing in a project, often used to assess the viability of a potential investment.

Invested Assets

The total value of financial assets into which resources have been allocated with the expectation of earning a return.