Ch04_LO.1_Q4-03.pdf - Discussion Question 4-3(LO 1...

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Discussion Question 4-3 (LO. 1)
Regarding the purpose for § 351, classify each of the following as either "Property" or "Not property".
a. Services
b. Plant and equipment
c. Unrealized receivables of a cash basis taxpayer
d. Installment obligations
e. Cash
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Questions have arisen concerning what constitutes property for purposes of § 351. In general, the definition of property is comprehensive.
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Answers: Not property; Property; Property; Property; Property.
Questions have arisen concerning what constitutes property for purposes of § 351. In general, the definition of property is comprehensive. For
example, along with plant and equipment, unrealized receivables of a cash basis taxpayer and installment notes are considered property. Although
the disposition of an installment note receivable normally triggers deferred gain, its transfer under § 351 is not treated as a disposition. Thus, gain
is not recognized to the transferor. Proprietary processes and formulas as well as proprietary information in the general nature of a patentable