Chapter 04 Homework Questions
Name: ________________________ Class: ___________________ Date: __________
ID: A
Chapter 04
True/False
Indicate whether the statement is true or false.
____
1. Section 351 (which permits transfers to controlled corporations to be tax deferred) can be justified under the wherewithal to pay concept.
____
2. Similar to like-kind exchanges, the receipt of “boot” under § 351 can cause loss to be recognized.
____
3. Tina incorporates her sole proprietorship with assets having a fair market value of $100,000 and an adjusted basis of $110,000. Even though § 351 applies, Tina may recognize her realized loss of $10,000.
____
4. In a § 351 transfer, a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000. Only
$7,000 of the boot will be taxed to the shareholder.
____
5. In a § 351 transfer, the receipt of boot is not taxed if the shareholder has a realized loss.
____
6. In a § 351 transfer, gain will be recognized to the extent of the lesser of realized gain or the boot received.
____
7. Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for
85% of the stock of Heron Corporation. In addition, he receives cash of $40,000. Allen recognizes a capital gain of $40,000 on the transfer.
____
8. The definition of property for purposes of § 351 includes unrealized receivables transferred by a cash basis taxpayer. ____
9. The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.
____ 10. A secret process and patentable invention both constitute “property” for purposes of § 351.
____ 11. Since services are not considered property under § 351, a taxpayer must report as income the fair market value of stock received for such services.
____ 12. The receipt of securities (i.e., long-term debt) in exchange for the transfer of
ID: A
Chapter 04
True/False
Indicate whether the statement is true or false.
____
1. Section 351 (which permits transfers to controlled corporations to be tax deferred) can be justified under the wherewithal to pay concept.
____
2. Similar to like-kind exchanges, the receipt of “boot” under § 351 can cause loss to be recognized.
____
3. Tina incorporates her sole proprietorship with assets having a fair market value of $100,000 and an adjusted basis of $110,000. Even though § 351 applies, Tina may recognize her realized loss of $10,000.
____
4. In a § 351 transfer, a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000. Only
$7,000 of the boot will be taxed to the shareholder.
____
5. In a § 351 transfer, the receipt of boot is not taxed if the shareholder has a realized loss.
____
6. In a § 351 transfer, gain will be recognized to the extent of the lesser of realized gain or the boot received.
____
7. Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for
85% of the stock of Heron Corporation. In addition, he receives cash of $40,000. Allen recognizes a capital gain of $40,000 on the transfer.
____
8. The definition of property for purposes of § 351 includes unrealized receivables transferred by a cash basis taxpayer. ____
9. The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.
____ 10. A secret process and patentable invention both constitute “property” for purposes of § 351.
____ 11. Since services are not considered property under § 351, a taxpayer must report as income the fair market value of stock received for such services.
____ 12. The receipt of securities (i.e., long-term debt) in exchange for the transfer of