Jean Corporation has two divisions- home cookware and electric home appliances. Bill and Bob Jean own all of Jean Corporation's single class of stock. Bill, the older brother, owns 70% of the Jean stock, and Bob owns the remaining 30%. Bill and Bob's adjusted bases in their Jean stock are $700,000 and $300,000, respectively. They have owned the stock for eight years. The divisions have the following assets:

To divide the business, Jean transfers the cookware assets to Cookware Corporation in exchange for all of Cookware stock. Jean transfers the home appliance assets to Home Appliance Corporation in exchange for all of Home Appliance stock. Jean transfers the Cookware stock to Bill in exchange for all of his Jean stock. Jean transfers the Home Appliance stock to Bob in exchange for all of his Jean stock. Finally, Jean liquidates with its remaining cash used to pay off its liabilities.
a. What gain or loss is recognized on the transfer of the Jean assets to Cookware and Home Appliance? What basis do the two corporations take in the assets transferred?
b. What gain or loss do Bill and Bob recognize when they exchange their Jean stock for the Cookware and Home Appliance stock? What basis does each shareholder take in his or her new stock?

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FMV Assets $980,000 420,000 Adjusted Basis $600,000 300,000 Division Cookware Home appliances