Question

When the basis of property contributed carries over to the corporation in a tax-deferred 351 transaction, the depreciation schedule _________.

Answer 1

In a tax-deferred 351 transaction, the depreciation schedule for the contributed property continues as it was before the transfer, maintaining the same method, life, and convention.

Step-by-step explanation:

When the basis of property contributed carries over to the corporation in a tax-deferred 351 transaction, the depreciation schedule continues as it was prior to the transfer. This means that the same depreciation method, life, and convention must be used by the corporation as was used by the contributing shareholder. This rule is in place to prevent taxpayers from manipulating the tax benefits of depreciation through the transfer of property to a corporation.