Calculation of Basis in Stock Received in § 351 Transfer: True

Discussion Question 4-11 (LO. 1, 2, 3) With respect to the calculation of the basis of stock received by a shareholder in a § 351 transfer, label each of the following as being either "True" or "False". a.If a shareholder transfers a liability to the corporation along with property, the basis in the stock received is reducedby the amount of the liability transferred to the corporation.  ✔ b.The shareholder's basis in the property transferred becomes the basis of the stock received, increased by the amountof gain recognized by the shareholder and decreased by the fair market value of boot received and the amount of liabilities transferred to the corporation.  ✔ c.Code § 362(e)(2) generally requires the corporation to step down the carryover basis for the property by the amountof the net built-in loss.  ✔ d.If a shareholder receives "other property" (boot) in addition to stock in a § 351 transfer, loss is recognized by theshareholder to the extent of the lesser of the loss realized or the fair market value of the boot received.  ✔ Feedback Check My Work Section 351(a) postpones gain or loss until the transferor-shareholder disposes of the stock in a taxable transaction. The postponement of shareholder gain or loss has a corollary effect on the basis of the stock received by the shareholder and the basis of the property received by the corporation. This procedure ensures that any gain or loss postponed under § 351 ultimately will be recognized when the affected asset is disposed of in a taxable transaction.