Conan and Andy decide to form a new corporation, LN Corp. Conan contributes property with a basis of $10,000 and a fair market value of $18,000 in exchange for 5 shares of LN stock and $13,000 in cash which LN borrows from a bank to finance. Andy contributes property with a basis of $35,000 and a fair market value of $80,000 in exchange for 80 shares of LN stock.
a. How much taxable gain or loss will Conan recognize as a result of the transaction?
b. What basis will Conan take in the LN stock he recieves?