The bona fide business requirement of § 357(b) is easily satisfied as long as the liability arose in the normal course of conducting the business that is incorporated.

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Section 357(b) of the IRS code provides that when a corporation assumes a liability in connection with the transfer of property to the corporation, the transferor shareholder will not recognize gain or loss to the extent of the liability assumed. This provision is subject to the bona fide business requirement, which states that the liability must have arisen in the normal course of conducting the business that is incorporated. This requirement is easily satisfied as long as the liability was incurred in the ordinary course of the corporation's business operations. Therefore, the statement is true.

The Bona Fide Business Requirement of § 357(b) Is Easily