1. Silvia transfers to Leaf Corporation a machine she had purchased a year ago for $50,000. Themachine has a $40,000 adjusted basis and an $55,000 FMV on the transfer date. $10,000 in depreciation was claimed by Silvia prior to the transfer. Silvia receives all 1,000 shares of Leaf Corporation stock worth $50,000 and a two-year note with a $5,000 FMV. What is the amount and character of the recognized gain or loss?

2. Lynn transfers land having a $50,000 adjusted basis, an $80,000 FMV, and $10,000 cash to Allied Corporation in exchange for 100% of Allied's stock. The corporation assumes the $70,000 mortgage on the land. Which of the following statements is correct?

A) Lynn recognizes no gain and the stock basis is $60,000.

B) Lynn recognizes a $10,000 gain and the stock basis is $60,000.

C) Lynn recognizes no gain and the stock basis is $50,000.

D) Lynn recognizes a $10,000 gain and the stock basis is zero.