16) John and Mary form a new corporation and they will both own 50% of the stock of Dewey Corp. (Apts) Mary transfers her grocery store, in downtown Dewey. It's worth $800,000. Her basis in the store, inherited from her Dad, is $600,000. John transfers his beer making equipment, which is worth $600,000. His basis is $400,000 in the equipment. Plus, John, a lawyer, has contributed legal advise and will get $200,000 worth of the stock for this (the balance he gets is, of course, worth $600,000) Mary recognizes taxable gain of $200,000 John recognizes taxable income of $200,000 John recognizes total taxable income of $400,000 on this deal. Neither party recognizes any gain or income. Mary recognizes $200,000 of income and John recognizes income of $400,000