Identify which of the following statements is true.

Question

Quizplus · Accepted Answer

When depreciable property is transferred to a corporation in a Sec. 351 exchange in which no gain is recognized, the corporation must continue to use the transferor's depreciation method and recovery period for the property. This is because the basis of the transferred assets carries over to the corporation. Therefore, the corporation must continue to use the same depreciation method and recovery period as the transferor. Choice A is false because the corporation must use the same depreciation method and recovery period as the transferor. Choice B is false because Sec. 1245 property is subject to depreciation recapture regardless of the transaction in which it is exchanged. Therefore, it is not specific to a Sec. 351 exchange.

Identify Which of the Following Statements Is True