Question

Question 2 3.03 points Save Answer Identify which of the following statements is true. A corporation must recognize a loss when transferring noncash boot property that has declined in value and its stock to a transferor as part of a Sec. 351 exchange Section 351 provides for nonrecognition of gain for the transferee corporation when it distributes appreciated and that is boot property to a shareholder The transferee corporation's holding period for assets acquired in an exchange meeting the Sec. 351 requirements includes the transferor's holding period for the property All of the above are false.

Answer 1

1) Solution: The transferee corporation's holding period for assets acquired in an exchange meeting the Sec. 351 requirements includes the transferor's holding period for the property.
Explanation: For an exchange meeting according to Section 351 requirements on Transferee Corporation’s holding period would take into consideration the holding period of the transferor's for the property.

2) Trail corporation has gross profits on sales of $140,000 and deductible expenses of $180,000. In addition, Trail has a net capital gain of $60,000
Solution: $20,000
Working: Taxable Income = [Gross Profit + Capital Gain - Deductible expenses] = [$140,000 + $60,000 - $180,000] = $20,000

3) Solution: Under the check-the-box regulations, an LLC that has one member (owner) may be disregarded as an entity separate from its owner
Explanation: LLC with a single member would not be regarded as an entity that is separated from its owner