Identify which of the following statements is true.
A)If stock and boot property are both received in a Sec. 351 exchange, the transferor must allocate the total basis in the contributed property between the stock and boot property based on the relative FMVs of the stock and the boot property.
B)The adjusted basis of stock received in a Sec. 351 transaction is computed by deducting the deferred loss from the FMV of the stock received.
C)The holding period for stock received in a Sec. 351 transaction in exchange for a capital asset begins on the day after the date of the exchange.
D)All of the above are false.

Question

Quizplus · Accepted Answer

A) False: In a Sec. 351 exchange, the total basis in the contributed property is allocated between the stock and boot property based on their respective FMVs, but no allocation is necessary if the value of the boot property is less than 25% of the total value of the consideration received.
B) False: The adjusted basis of the stock received in a Sec. 351 transaction is the same as the adjusted basis of the contributed property, and no deferred loss is recognized.
C) False: The holding period for stock received in a Sec. 351 exchange includes the holding period of the transferred asset.

Identify Which of the Following Statements Is True