Which of the following scenarios would be most appropriate for a Section 85 rollover?
A)A shareholder of a corporation wishes to transfer property with a fair market value of $150,000 and a tax cost of $100,000 to his corporation.
B)A shareholder of a corporation wishes to transfer property with a fair market value of $100,000 and a tax cost of $150,000 to his corporation.
C)A shareholder of a corporation wishes to transfer property with a fair market value of $150,000 and a tax cost of $100,000 from his corporation.
D)A shareholder of a corporation wishes to transfer property with a fair market value of $100,000 and a tax cost of $150,000 from his corporation.

Question

Quizplus · Accepted Answer

A Section 85 rollover is appropriate when a shareholder transfers property to a corporation, and the transfer is considered tax-neutral, meaning the shareholder doesn't recognize a gain or a loss. In this scenario, the fair market value of the property is greater than the tax cost, which makes it an appropriate scenario for a Section 85 rollover. Choice B and D have a tax cost greater than the fair market value, which means the shareholder would recognize a loss if they choose to transfer the property. Choice C is not appropriate as the shareholder is transferring the property out of the corporation.

Which of the Following Scenarios Would Be Most Appropriate for a Section