1. Sean recognized any gain on the incorporation?2. What basic does Sean have in the aqua stock?3. What basic does aqua Corp. have in the assets it received?

7. Sean, a sole proprietor, is engaged in a service business and uses the cash basis of accounting. In the current year, Sean incorporates his business by forming Aqua Corporation. In exchange for all of its stock, Aqua receives: assets (basis of $400,000 and fair market value of $2,000,000), trade accounts payable of $1 10,000, and loan of $390,000 due to a bank. The proceeds from the bank loan were used by Sean to provide operating funds for the business. Aqua Corporation assumes all of the liabilities transferred to it. a. Does Sean recognize any gain on the incorporation? Explain. b. What basis does Sean have in the Aqua stock? c. What basis does Aqua Corporation have in the assets it receives