Allen transfers marketable securities with an adjusted basis of $120,000, fair market value of $300,000, for 85% of the stock of Heron Corporation. In addition, he receives cash of $40,000 . Allen recognizes a capital gain of $40,000 on the transfer
a. True
b. False
Indicate whether the statement is true or false
True
RATIONALE: Allen recognizes $40,000 of capital gain. The gain on the transfer is limited to the boot received of $40,000; further, the gain is characterized by reference to the assets transferred, which are capital assets in Allen's hands.
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