Final answer:
The claim that the transferor's basis for noncash boot in a sec. 351 transaction is reduced by any unrecognized gain is false; the basis of the boot is equal to its FMV without any reduction for unrecognized gain.
Step-by-step explanation:
The statement that the transferor's basis for any noncash boot property received in a sec. 351 transaction is the boot's FMV (Fair Market Value) reduced by any unrecognized gain is false. In a sec. 351 transaction, when a transferor receives both stock (which is not taxable) and noncash boot (which can be other property or money and is taxable), the basis of the noncash boot received is equal to its FMV. However, the transferor must recognize gain to the extent of the lesser of the FMV of the boot received or the unrecognized gain on the property transferred. The gain recognized increases the basis of the stock received, but the basis of the boot received is not reduced by any unrecognized gain; it remains equal to its FMV.