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:

Taxable Income

The amount of income used to calculate how much tax an individual or a company owes to the government in a specific period.

Inventory Cost Flow Assumptions

Assumptions made about how inventory costs move through a company's financial statements, including FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and weighted average cost methods.

Descriptive Statements

Statements that provide detailed information or explanation about a specific topic, often used in documentation or reporting.

LIFO

Last In, First Out, an inventory valuation method that assumes goods purchased last are the first ones sold, affecting the cost of goods sold and inventory valuation.