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?

Question

Quizplus · Accepted Answer

When a shareholder contributes capital to a corporation, the shareholder does not recognize gain or loss on the transfer. The corporation's basis in the property transferred equals the shareholder's basis in the property transferred. Therefore, choice B is correct. Choice A is incorrect because the corporation's basis in the property is not zero. Choice C is incorrect because the shareholder does not recognize gain or loss on the transfer. Choice D is incorrect because the corporation's basis in the property transferred equals the shareholder's basis, not its fair market value.

Which of the Following Statements Best Describes the Tax Consequences