The receipt of securities (i.e., long-term debt) in exchange for the transfer of appreciated property to a controlled corporation results in recognition of realized gain to the transferor.

Question

Quizplus · Accepted Answer

According to the tax law, when a person transfers appreciated property to a controlled corporation, and in exchange receives securities such as long-term debt, it results in the recognition of realized gain to the transferor. This is known as the "transferor's recognition rule."

The Receipt of Securities (I