Which of the following scenarios describes a situation where tax law applies to the transfer of property between entities?

The correct answer illustrates a specific provision under the Internal Revenue Code, known as Section 351, which governs the tax implications of property transfers in exchange for stock in a corporation. When individuals or entities transfer property to a corporation in exchange for its stock and, in return, gain control of the corporation as a result of this transfer, Section 351 allows for a tax-deferred exchange. This means that the transfer does not trigger immediate tax consequences, allowing for a more favorable treatment of the exchange.

In detail, one of the key requirements of Section 351 is that the transferors must collectively own at least 80% of the corporation immediately after the exchange. This provision incentivizes investors to contribute property to a corporation without incurring immediate recognition of gain or loss, making it a beneficial aspect for both tax planning and corporate formation.

The other provided scenarios do not have the same tax-deferral treatment or generally do not involve the same transfer of property in the context of gaining control over a new entity. Gifts between family members may have gift tax implications but do not apply the same structure as corporate transfers. The transfer of stock for cash represents a sale, which typically is a taxable event. Lastly, an investment in a partnership usually does not trigger the same