Identify which of the following statements is true.
A)Section 351 provides for nonrecognition of gain for the transferee corporation when it distributes appreciated land that is boot property to a shareholder.
B)A corporation must recognize a loss when transferring noncash boot property that has declined in value and its stock to a transferor as part of a Sec. 351 exchange.
C)The transferee corporation's holding period for assets acquired in an exchange meeting the Sec. 351 requirements includes the transferor's holding period for the property.
D)All of the above are false.

Question

Quizplus · Accepted Answer

Section 351 provides for nonrecognition of gain or loss for both transferor and transferee corporations in certain exchanges of property for stock. If the transferor receives only stock in the transaction, there is no gain or loss recognized. If the transferor receives boot in addition to stock, gain is recognized to the extent of boot received. The transferee corporation's holding period for assets acquired in a Sec. 351 exchange includes the transferor's holding period for the property. Option A is incorrect as appreciated land that is considered as boot property will be recognized for the transferee corporation. Option B is incorrect because the corporation transferring the noncash boot property that has declined in value must recognize the loss rather than both the transferor and transferee corporations. Option D is incorrect.

Identify Which of the Following Statements Is True