Under Section 351(b), when a transferor receives boot (cash or property other than stock) in addition to stock, gain is recognized to the extent of the lesser of (1) realized gain or (2) boot received. Petra's realized gain = $100,000 FMV - $40,000 basis = $60,000. Boot received = $10,000 cash. Recognized gain = lesser of $60,000 or $10,000 = $10,000. Answer A is incorrect because receipt of boot triggers partial gain recognition. Answer B ($60,000) would be the recognized gain only if boot received equaled or exceeded the full realized gain. Answer D ($50,000) has no valid basis in the Section 351(b) computation.

Section 721 provides that no gain or loss is recognized by a partner upon contribution of property to a partnership in exchange for a partnership interest, except in certain limited circumstances such as disguised sales or contribution of services. The contributing partner's basis in the partnership interest equals the adjusted basis of the contributed property ($30,000) under Section 722, and the partnership takes a carryover basis in the property under Section 723. Answer B is incorrect because the built-in gain is deferred, not recognized, on formation. Answer C is incorrect because Section 721 nonrecognition is not limited to a percentage; no gain is recognized. Answer D is incorrect for the same reason; the entire built-in gain is deferred under Section 721.

Under Section 331, amounts received by a shareholder in a complete liquidation of a corporation are treated as full payment in exchange for the shareholder's stock. The shareholder recognizes gain or loss equal to the difference between the fair market value of property received and the adjusted basis of the stock. Here, the $120,000 gain ($200,000 - $80,000) is capital gain. Answer A is incorrect because Section 331 provides sale-or-exchange treatment, resulting in capital gain rather than ordinary income. Answer B is incorrect because the dividend rules apply to non-liquidating distributions; Section 331 expressly overrides the dividend rules for complete liquidations. Answer D is incorrect because gain is recognized to the extent proceeds exceed stock basis; only the return of basis portion ($80,000) is tax-free.

Under Section 331, the shareholder treats the liquidating distribution as proceeds from the sale of stock. The amount realized equals the fair market value of the property received ($150,000). Gain = $150,000 - $40,000 stock basis = $110,000. Answer B is correct. Answer A ($150,000) ignores the shareholder's stock basis entirely. Answer C ($90,000) has no valid basis in the computation. Answer D ($60,000) is the corporate-level adjusted basis in the distributed property, which is irrelevant to the shareholder's Section 331 gain calculation.

Under Section 722, the basis of a partner's interest acquired by contribution equals the sum of money contributed plus the adjusted basis of any property contributed. Cash contribution = $50,000; property basis = $20,000; total basis = $70,000. The fair market value of the contributed property is irrelevant to the partner's outside basis calculation. Answer B ($85,000) incorrectly substitutes the FMV of the property ($35,000) for its adjusted basis. Answer C ($50,000) counts only the cash and ignores the property contribution entirely. Answer D ($35,000) uses only the property's FMV and ignores the cash contribution.

Under Section 708(b)(1)(A), a partnership is terminated when no part of any business, financial operation, or venture of the partnership continues to be carried on by any of its partners in a partnership. This is the cessation-of-business termination, distinct from the now-repealed technical termination. Answer A is incorrect because the death of a general partner does not automatically terminate the partnership for tax purposes; state law governs dissolution, but the tax partnership may continue if it is not wound up. Answer B is incorrect because a bankruptcy filing does not terminate the tax partnership. Answer C is incorrect because dilution of a partner's interest through admission of new partners does not cause a termination under Section 708.

Under Section 331, the shareholder's amount realized equals the fair market value of property received minus any liabilities assumed by the shareholder. When encumbered property is distributed, the shareholder takes the property subject to the existing mortgage. Amount realized = $350,000 - $80,000 = $270,000. The shareholder then computes gain by comparing $270,000 to the stock basis. Answer B is correct. Answer A ($350,000) ignores the mortgage reduction to amount realized. Answer C ($150,000) would result from subtracting the corporate basis ($200,000) from FMV ($350,000), which is not the correct computation. Answer D ($430,000) incorrectly adds the mortgage rather than subtracting it.

Under Section 358(a), the transferor's basis in stock received in a Section 351 exchange equals the adjusted basis of the property transferred, decreased by any money received or liabilities assumed, and increased by any gain recognized. Since no boot was received and no gain was recognized, Dunmore's basis in the Newco stock = $70,000 (the adjusted basis of the property transferred). Answer A ($95,000) is the FMV of the stock received and would apply only if gain were fully recognized. Answer B ($25,000) represents the unrealized appreciation, not the stock basis. Answer C ($85,500) represents 90% of the FMV, which has no basis in Section 358.

Under Section 1362(d)(1), an S election may be revoked voluntarily if shareholders holding a majority of shares (more than 50%) consent to the revocation. The revocation may be effective immediately, prospectively, or at the beginning of the following tax year, depending on when it is filed. Answer A is incorrect because failure to file returns does not constitute a voluntary revocation; it may cause other penalties but not an automatic election termination. Answer C is incorrect because net operating losses have no effect on S election status. Answer D is incorrect because revocation requires the consent of shareholders holding more than 50% of shares, not fewer than 50%.

Under Section 1362, an S election must be consented to by all persons who are shareholders on the date the election is made. If the election is to be effective for the entire current tax year, it must also be consented to by all shareholders who held stock during the portion of the taxable year before the election date. Answer D is correct. Answer A is incorrect because the S corporation shareholder limit is 100, not 150. Answer B is incorrect because accumulated C corporation E&P does not have to be distributed before the S election; it remains as C corporation E&P and is subject to built-in gains and passive income rules after conversion. Answer C is incorrect because an S corporation must use a permitted tax year, but conversion to a calendar year is not a prerequisite for the election itself.