A parent decided to utilize the tax-deferred method of a share reorganization to transfer the business to the child. Which of the following would be true?

Multiple Choice

• The parent would sell their common shares to their child.

• The child would acquire the common shares at a nominal cost.

• The child would acquire the common shares at their fair market value.

• The parent would have a tax liability on the sale, but it would be less compared to a third-party sale.