Abby and Bera are forming a Delaware corporation, AB Co. Abby contributes $100 cash in exchange for 50% of the AB Co. Bera contributes a painting, which is worth $100 in exchange for 50% of the AB Co. Beras basis in the painting immediately before the contribution was $80.

1. Which of the following analysis is incorrect with respect to above transaction?

The transaction qualifies as a 351 tax-free transaction for Abby.

The transaction does not qualify as a 351 tax-free transaction for Bera because she contributed property other than cash.

The ownerships in AB Co of Abby and Bera are aggregated for the purpose of determining whether control is satisfied under 351.

The control threshold under 351 is at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of nonvoting stock.

2. What is AB Cos basis in the painting?

$80

$50

$0

$100