Alice and Jane form Osprey Corporation. Alice transfers property, basis of $25,000 and value of $200,000, for 50 shares in Osprey Corporation. Janetransfers property, basis of $50,000 and value of $165,000, and agrees to serve asmanager of Osprey for one year; in return, Jane receives 50 shares in Osprey. The value of Janes services to Osprey is $35,000.

a. What gain or income do Alice and Jane recognize on the exchange?

b. What is Osprey Corporations basis in the property transferred by Alice and Jane? How does Osprey treat the value of the services that Jane renders?