Cynthia, a sole proprietor, was engaged in a service business and reported her income on the cash basis. On February 1, 2013, she incorporates her business as Dove Corporation and transfers the assets of the business to the corporation in return for all of the stock in addition to the corporation's assumption of her proprietorship's liabilities. All of the receivables and the unpaid trade payables are transferred to the newly formed corporation. The balance sheet of the corporation immediately after its formation is as follows:

Liabilities and Stockholder's Equity
Liabilities:
Accounts payable-trade................................$ 120,000
Notes payable-bank.......................................360,000
Stockholder's equity:
Common stock..............................................720,000
Total.....................................................$1,200,000
Discuss the tax consequences of the incorporation of the business to Cynthia and to Dove Corporation.

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Dove Corporation Balance Sheet February 1, 2013 Assets Basis to Dove Fair Market Value $80,000 80,000 Cash Accounts receivable Equipment (cost $180,000; 240,000 depreciation previously daimed $60,000) 120,000 160,000 40,000 400,000 320,000 400,000 160,000 $1,200,000 Building (straight-line depreciation) Land Total