Question

(13) 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.

Answer 1

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 FMV''s of the stock and the boot property is a false because transferor must not allocate on the basis of relative FMV''s of the stock and the boot property.

B)This is a false statement because the deferred loss is not deducted from FMV of the stock received for calculating the adjusted basis for stock received

C)This is a false statement because the holding period of stock received in the exchange for capital asset begin on the same day of the exchange.

Therefore all the statement (A), (B) and (C) are false

So, Answer is statement "D"