South Western Federal Taxation 2018 Corporations Partnerships Estates and Trusts 41st Edition – Test Bank
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1. Similar to the like-kind exchange provision, § 351 can be partly justified under the wherewithal to pay concept. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: CPET.SWFT.LO: 4-01 – LO: 4-01 NATIONAL STANDARDS: United States – BUSPORG: Comprehension – BUSPORG: Comprehension STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Comprehension OTHER: Time: 2 min. |
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2. Similar to like-kind exchanges, the receipt of “boot” under § 351 can cause loss to be recognized. a. True b. False ANSWER: False RATIONALE: Realized gain, not loss, is recognized to the extent of the boot received. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: CPET.SWFT.LO: 4-01 – LO: 4-01 NATIONAL STANDARDS: United States – BUSPORG: Comprehension – BUSPORG: Comprehension STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Knowledge OTHER: Time: 2 min. |
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3. Tina incorporates her sole proprietorship with assets having a fair market value of $100,000 and an adjusted basis of $110,000. Even though § 351 applies, Tina may recognize her realized loss of $10,000. a. True b. False ANSWER: False RATIONALE: Section 351 does not permit the recognition of realized losses. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: CPET.SWFT.LO: 4-01 – LO: 4-01 NATIONAL STANDARDS: United States – BUSPORG: Comprehension – BUSPORG:Comprehension STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Application OTHER: Time: 2 min. |
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4. In a § 351 transfer, a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000. Only $7,000 of the boot will be taxed to the shareholder. a. True b. False ANSWER: False RATIONALE: If a shareholder ends up with a realized loss, the receipt of the boot will not cause that loss to be recognized. The receipt of boot will only trigger a realized gain. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: CPET.SWFT.LO: 4-01 – LO: 4-01 NATIONAL STANDARDS: United States – BUSPORG: Comprehension – BUSPORG: Comprehension STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Application OTHER: Time: 2 min. |
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5. A taxpayer may never recognize a loss on the transfer of property in a transaction subject to § 351. a. True b. False ANSWER: True RATIONALE: Losses may never be recognized on the exchange of property in a § 351 transaction. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: CPET.SWFT.LO: 4-01 – LO: 4-01 NATIONAL STANDARDS: United States – BUSPORG: Comprehension – BUSPORG: Comprehension STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Comprehension OTHER: Time: 2 min. |
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6. If a transaction qualifies under § 351, any recognized gain is equal to the value of the boot received. a. True b. False ANSWER: False RATIONALE: Recognized gain cannot exceed the amount of gain realized. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: CPET.SWFT.LO: 4-01 – LO: 4-01 NATIONAL STANDARDS: United States – BUSPORG: Comprehension – BUSPORG: Comprehension STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Comprehension OTHER: Time: 2 min. |
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