Question

Identify which of the following statements is true

a. the repeal of sec. 351 would result in more existing businesses being incorporated
b. the exchange of stock for services rendered is not a taxable transaction
c. section 351 was enacted to allow taxpayers to incorporate without incurring adverse tax consequences
d. all of the above are false

Answer 1

The true statement is that Section 351 was enacted to allow taxpayers to incorporate without incurring adverse tax consequences.

Step-by-step explanation:

The correct statement is c. Section 351 was enacted to allow taxpayers to incorporate without incurring adverse tax consequences.

Section 351 of the Internal Revenue Code provides a tax-deferred treatment for the transfer of property to a corporation in exchange for stock. It allows individuals and businesses to contribute assets, such as property or services, to a corporation in exchange for stock without recognizing the gain or loss for tax purposes.

The repeal of sec. 351 would not result in more existing businesses being incorporated as it would eliminate the tax benefits provided by this section. The exchange of stock for services rendered can be a taxable transaction, depending on the circumstances.