Antoine, Becky, and Colleen form ABC Corporation by contributing the following items in exchange for stock in ABC Corporation:

Adjusted Basis Fair Market Value

of property given of property given Shares of Stock Received

Antoine:

Cash $ 30,000 $30,000

Equipment 300,000 420,000 4500 shares

Becky:

Land $100,000 $480,000 3000 shares*

Mortgage 150,000 (150,000)

Colleen:

Services $0 $ 50,000 500 shares

Additional information:

• Colleen has a PhD in computer technology and designed their online platform.

*Becky received $30,000 of cash in addition to 3,000 shares of ABC Stock.

Questions:

1. What basis does ABC corporation have in:

• Equipment (contributed by Antoine)
• Land (contributed by Becky

2. New scenario: Assume that the services performed by Colleen were valued at $500,000; therefore, Colleen received 5,000 shares of stock. Thus, ownership would now be:

Antoine 4,500 shares

Becky 3,000 shares

Colleen 5,000 shares

Under this new scenario:

• How much gain, loss, or income would Antoine recognize?
• How much basis would Antoine have in ABC stock?

3. In one or two sentences, explain why the answers under the new scenario (i.e. when Colleens services are more highly valued) are different from the original problem.