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Sadie incorporates her sole proprietorship with assets having a fair market value of $80,000 and an...

Sadie incorporates her sole proprietorship with assets having a fair market value of $80,000 and an adjusted basis of $100,000. Even though § 351 applies, Sadie may recognize her realized loss of $20,000.

True or False

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Answer #1

Answer: False

Here, the loss is (adjusted basis – Fair market value = 100,000 – 80,000 =) $20,000.

This is the transfer to corporation, since the section 351 is applied. In such case any sort of gain should be recognized but loss should not be recognized.

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