CHAPTER 18 CORPORATIONS: ORGANIZATION AND CAPITAL

1.
Similar to the like­kind exchange provision, § 351 can be
partly justified under the wherewithal to pay concept.
a. True
b. False

2.
Similar to like­kind exchanges, the receipt of “boot” under
§ 351 can cause loss to be recognized.
a. True
b. False

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.
a. True
b. False

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.
a. True
b. False

5.
A taxpayer may neverrecognize
a loss on the transfer of property in a transaction subject to § 351.
a. True
b. False

6.
If a transaction qualifies under § 351, any recognized gain
is equal to the value of the boot received.
a. True
b. False

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.
a. True
b. False

8. When consideration is
transferred to a corporation in return for stock, the definition of “property”
is important because tax deferral treatment of § 351 is available only to
taxpayers who transfer property.
a. True
b. False

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.
a. True
b. False

10.Gabriella and Maria
form Luster Corporation with each receiving 50 shares of its stock. Gabriella
transfers cash of $50,000, while Maria transfers a proprietary formula (basis
of $0; fair market value of $50,000). Neither Gabriella nor Maria will
recognize gain on the transfer.
a. True
b. False

11.Because services are
not considered property under § 351, a taxpayer must report as income the fair
market value of stock received for such services.
a. True
b. False

12.For § 351 purposes,
stock rights and stock warrants are included in the definition of “stock.”
a. True
b. False

13.In a § 351
transaction, if a transferor receives consideration other than stock, the
transaction can be taxable.
a. True
b. False

14.The receipt of
nonqualified preferred stock in exchange for the transfer of appreciated
property to a controlled corporation results in recognition of gain to the
transferor.
a. True
b. False

15.Ruth transfers
property worth $200,000 (basis of $60,000) to Goldfinch Corporation. In return,
she receives 80% of its stock (worth $180,000) and a long-term note, executed
by Goldfinch and made payable to Ruth (worth $20,000). Ruth will recognize no
gain on the transfer.
a. True
b. False