Adam, Beth, Clayton and David are forming a bakery business, called ABCD Corp, and decided to organize as a corporation. Adam Beth and Clayton will each own 300 shares of the common stock and David will own 100 shares of the stock (there are 1000 shares total of the corporation). Adam is contributing cash of $200,000, Beth is contributing equipment from a prior business that was originally purchased for $300,000 and was depreciated for tax purposes by $120,000 (current FMV is $200,000). Clayton is contributing a store front that he purchased two years ago for $250,000, but is currently worth only $200,000. David is contributing his time and will work full time for the business as the manager for the first year to train all the staff and get the business running on its own (Davids services would cost $67,000).

A. Determine any gains/losses or income that may be recognized incident to the formation of ABCD Corp. (make sure you consider the tax consequences pursuant to IRC Section 351).