True or False:

1. In structuring the capitalization of a corporation, the tax law favors debt versus equity financing.

2. Three individuals form Skylark Corporation with the following contributions (i) Cliff, cash of $50,000 for 10 shares; (ii) Brad, land (fair market value of $20,000) for 4 shares; and (iii) Ron, cattle (fair market value of $5,000) for 1 share and services (fair market value of $40,000) for 8 shares.

3. If a liability is transferred to a corporation in a transaction that qualifies as a § 351 exchange, the liability will not be treated as boot for purposes of calculating the transferor’s gain recognized, but will treated as boot for purposes of calculating the Transferor’s basis in stock received.