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assumptions of her proprietorship’s liabilities. All of the receivables and the unpaid trade payables are transferred to the newly formed corporation discuss the tax consequences of the incorporation of the business to Cynthia and to DoveCorporation.When liabilities are transferred t hey are generally treated as cash or boot. However, if the acquiring corporation assumes a liability in a 351 transaction the liability is not treated as bot received for gain recognition purposes. But the liabilities are treated as boot in determining the basis of the stock received by the shareholders. In order for there to be no tax here must be a bona fide business purpose behind the exchange andif the liabilities exceed the adjusted basis of the properties transferred, the excess is taxable gain. Assuming these are met Cynthia would not recognize a gain or loss. 33. Rafael transfers the following assets to Crane Corporation in exchange for all of it’s stock. (assume that neither Rafael nor Crane plans to make an special tax elections at the time of incorporation. a. What is Rafael’s recognized gain or loss?