Alicia owns Advertising Solutions, Inc. (ASI) and sells 100% of the company stock on January 2 of this year to an ESOP for $2,000,000. Alicia had an adjusted basis in the ASI stock of $150,000. She purchased the stock on July 3, 2001. Which of the following statement(s) is(are) true? Explain your answer to each statement.

Alicia will not recognize long-term capital gain or ordinary income this year if she reinvests the proceeds of the sale in qualified replacement securities within 12 months.

Alicia must recognize $1,850,000 of long-term capital gain at the time of the sale to the ESOP.

If Alicia dies before selling the qualified replacement securities when the fair market value of those qualified replacement securities is $4,000,000, her heirs will have an adjusted basis in the qualified replacement securities of $2,150,000.