Andrew organized X Corporation by transferring the following: inventory with a basis of $20,000 and a fair market value of $10,000 and unimproved land held for several years with a basis of $20,000, a fair market value of $40,000 and subject to a recourse debt of $30,000. In return, Andrew received 20 shares of X stock (fair market value, $20,000) and X took the land subject to the debt.

(a) Assuming no application of Section 357(b), how much gain, if any, does Andrew recognize and what is the Andrews basis and holding period in the stock?

(b) What result in, (a), above, if the basis of the land were only $5,000?

(c) In (b), above, what is the character of Andrews recognized gain under Tax Regulation Section 1.357-2(b)? Does this result make sense? How else might the character of Andrews gain be determined?

(d) In (b), what is X Corporations basis in the properties received from Andrew?

(e) What might Andrew have done to avoid the recognition of gain in (b), above?