43) Identify which of the following statements is true.
A) To determine a shareholder’s basis in a single class of stock received in a Sec. 351 exchange, the FMV of the stock received must be known.
B) If more than one asset is transferred by the transferor in a Sec. 351 nonrecognition transaction, the transferor is assumed to have received a proportionate share of the stock, cash, and other boot property for each property transferred based upon the assets’ relative FMVs.
C) The transferor’s basis for any noncash boot property received in a Sec. 351 transaction is the boot’s FMV reduced by any unrecognized gain.
D) All of the above are false.
44) 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.
45) Jerry transfers two assets to a corporation as part of a Sec. 351 exchange. The first asset has an adjusted basis of $70,000 and an FMV of $50,000. The second asset has an adjusted basis of $70,000 and an FMV of $150,000. The FMV of the stock received is $180,000, and he also receives $20,000 cash. The realized and recognized gain on the second asset is
A) $80,000 realized; $20,000 recognized.
B) $80,000 realized; $15,000 recognized.
C) $20,000 realized; $10,000 recognized.
D) $10,000 realized; $10,000 recognized.
46) Max transfers the following properties to a newly created corporation for $90,000 of stock and $10,000 cash in a transaction that qualifies under Sec. 351.
Asset One
Asset Two
Asset Three
FMV
Basis
$30,000
35,000
$45,000
40,000
$25,000
20,000
Max’s recognized gain is
A) $3,000.
B) $5,000.
C) $7,000.
D) $10,000.
47) Cherie transfers two assets to a newly-created corporation. The first asset has an adjusted basis of $40,000 and a FMV of $50,000. The second asset has an adjusted basis of $35,000 and a FMV of $25,000. Cherie receives stock with FMV of $66,000 and $9,000 cash. Cherie must recognize a gain of
A) $10,000.
B) $6,000.
C) $5,000.
D) $4,000.
48) Henry transfers property with an adjusted basis of $90,000 and an FMV of $100,000 to a newly-formed corporation in a Sec. 351 exchange. Henry receives stock with an FMV of $80,000 and a short-term note with a $20,000 FMV. Henry’s recognized gain is
A) $0.
B) $5,000.
C) $10,000.
D) $20,000.
49) Henry transfers property with an adjusted basis of $95,000 and an FMV of $100,000 to a newly formed corporation in a Sec. 351 exchange. Henry receives stock with an FMV of $85,000 and a short-term note with a $15,000 FMV. Henry’s basis in the stock is
A) $100,000.
B) $95,000.
C) $90,000.
D) $85,000.
50) A shareholder’s basis in stock received in a Sec. 351 transaction is
A) increased by the gain recognized by the corporation.
B) decreased by the gain recognized by the transferor.
C) decreased by liabilities assumed by the corporation.
D) increased by the FMV of boot received from the corporation.
51) Jeremy transfers Sec. 351 property acquired three years earlier having a $100,000 basis and a $160,000 FMV to Jeneva Corporation. Jeremy receives all 200 shares of Jeneva stock having a $140,000 FMV, and a $20,000 90-day Jeneva note. What is Jeremy’s recognized gain?
A) $0
B) $60,000
C) $20,000
D) $160,000
52) Carolyn transfers property with an adjusted basis of $50,000 and an FMV of $60,000 in exchange for Prime Corporation stock in a Sec. 351 transaction. Carolyn’s basis in the stock is
A) $60,000.
B) $50,000.
C) $10,000.
D) $0.