How are a transferor's basis and holding period determined for stock and other property (boot)

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 How are a transferor's basis and holding period determined for stock and other property (boot) received in a Sec. 351 exchange? How does the transferee corporation's assumption of liabilities affect the transferor's basis in the stock? (Abbreviation used: FMV = fair market value.)





Select the choice that accurately depicts how a transferor's basis is determined for stock and other property (boot) received in a Sec. 351 exchange, including how the transferee corporation's assumption of liabilities affect the transferor's basis in the stock.



A.

Basis of property transferred to the corporation
Plus:
Gain recognized
Minus:
Money received (including liabilities
 
treated as money)
 
FMV of noncash boot property
Total basis of stock received (Sec. 358(a))
 



B.

Basis of property transferred to the corporation
Plus:
Gain recognized
 
Money received (including liabilities
 
treated as money)
Minus:
FMV of noncash boot property
Total basis of stock received (Sec. 358(a))


C.

Basis of property transferred to the corporation
Plus:
Money received (including liabilities
 
treated as money)
 
FMV of noncash boot property
Minus:
Gain recognized
Total basis of stock received (Sec. 358(a))


D.

Basis of property transferred to the corporation
Plus:
FMV of noncash boot property
Minus:
Money received (including liabilities
 
treated as money)
 
Gain recognized
Total basis of stock received (Sec. 358(a))
How are a transferor's holding period determined for stock and other property (boot) received in a Sec. 351 exchange?



A.

The transferor's (shareholder's) holding period for the stock issued in exchange for any capital assets or Sec. 1231 assets transferred begins the day after the exchange date. If the shareholder transfers any other property, the holding period for any stock received includes the holding period of those non-capital assets transferred.



B.

The transferor's (shareholder's) holding period for the stock received in exchange for non-capital assets (e.g. inventory), capital assets or Sec. 1231 assets will begin on the day after the exchange date.



C.

The transferor's (shareholder's) holding period for the stock includes the holding period of any capital assets or Sec. 1231 assets transferred. If the shareholder transfers any other property, the holding period for any stock received begins on the day after the exchange date.

 



D.

The transferor's (shareholder's) holding period for the stock includes the holding period of any non-capital assets (e.g. inventory), capital assets or Sec. 1231 assets transferred. 
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