Because boot is generated under § 357(b) (i.e., the liability is not supported by a bona fide business purpose), the transferor shareholder will always have to recognize gain.

Question

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The recognition of gain due to boot in a transaction under § 357(b) is not automatic. The transferor shareholder will have to recognize gain only to the extent that the boot received exceeds the basis of the stock exchanged. The lack of a bona fide business purpose may lead to the reclassification of the liability as not assumed, but gain recognition depends on the specifics of the transaction, including the amount of boot received relative to the shareholder's basis in the exchanged property.

Because Boot Is Generated Under § 357(b) (I