Which statement regarding the application of section 351 is correct?

The application of section 351 is centered around the concept of tax deferral when transferring property to a corporation in exchange for its stock. The correct answer identifies that section 351 may apply regardless of the stock issuance proportion, meaning that the transferor does not need to receive stock proportional to their ownership interest or investment in the properties transferred.

This statement reflects the broader principle established under section 351, which allows individuals or entities to defer the recognition of gain or loss on the transfer of property to a corporation as long as they receive stock in return. The rule facilitates business formation and capital investment, encouraging individuals to contribute assets without incurring immediate tax liabilities.

In the context of the other choices, the incorrect answers present limitations that do not align with the provisions of section 351. The notion that shares must be issued proportionally (the first choice) misrepresents the flexibility allowed under the section. This allows for various arrangements in stock issuance and does not impose strict proportionality requirements. The information regarding Tony's basis and gain recognition (the last two choices) pertains to specific transactions and calculations rather than the fundamental principles of section 351 itself. Thus, these statements do not correctly capture the essence of how section 351 operates in general.