If property contributed by a shareholder in a valid Section 351 exchange is encumbered by a liability that is assumed by the corporation,

SELECT THE BEST ANSWER FROM THE LIST BELOW!!

The amount of the liability assumed is treated as boot received by the transferor (just like the normal exchange

rules)

The amount of the liability assumed is not treated as boot received by the transferor

The treatment of the liability assumption depends upon whether there is a legitimate business purpose for the DronertY to be encumbered bu a lability nrior to the transfer