Final answer:
In a § 351 transaction when a corporation assumes liabilities, these liabilities are treated as boot and can lead to a taxable event if they exceed the shareholder's basis in the transferred property. Shareholder liability is limited, which makes it easier for the corporation to raise capital and for shareholders to finance growth without extra personal liability.
Step-by-step explanation:
The general rule when a corporation assumes liabilities attached to property transferred by a shareholder in a 351 transaction is that the liabilities assumed are treated as boot, which could potentially create a taxable event for the shareholder if the liabilities exceed the shareholder's basis in the transferred property. However, the shareholder's liability is limited to the amount they have invested in the corporation. This feature of corporate financing provides significant advantages for both the corporation and the shareholder. For the corporation, it becomes easier to raise/borrow money for expansion or other business purposes.