When incorporating her sole proprietorship, Samantha transfers all of its assets and liabilities. Included in the $30,000 of liabilities assumed by the corporation is $500 that relates to a personal expenditure. Under these circumstances, the entire $30,000 will be treated as boot.

Question

Quizplus · Accepted Answer

The personal expenditure is not a liability of the business, so it is considered boot.

When Incorporating Her Sole Proprietorship, Samantha Transfers All of Its