Discussion Question 4-18 (LO. 7)

Sarah incorporates her small business but does not transfer to the corporation the machinery and equipment the business uses. Subsequently, the machinery and equipment are leased to the corporation for an annual rent.

Indicate whether the following statements are "True" or "False" regarding Sarah's decision not to transfer the machinery and equipment to the corporation when the business was incorporated.

a.	Leasing the machinery and equipment provides Sarah income that will be treated as dividend income.
b.	The transfer of the machinery and equipment would trigger a taxable event for the corporation.
c.	The corporation will be allowed a business deduction for the annual rent payment.
d.	Sarah will be allowed to deduct depreciation and other related expenses in connection with the leasing activity.