As part of a corporate formation meeting the 80% test,an individual who contributes property and receives,in return,stock plus property,will report a taxable gain equal to the lower of the FMV of the property received or the gain on the transfer.

Question

Quizplus · Accepted Answer

This statement is true. Under the 80% test, if an individual contributes property and receives stock plus more property in return, there will be a taxable gain. The taxable gain will be equal to the lower of the FMV of the property received or the gain on the transfer. This is known as the boot received and it will trigger a taxable gain for the individual.

As Part of a Corporate Formation Meeting the 80% Test,an