April, Joe, and Matt formed The Harbor Corporation. April contributed a building in exchange for 450 shares of stock in the corporation. April originally paid $400,000 but had taken depreciation expense of $175,000. The appraisal came back that gave the building a fair market value of $550,000. April still owed $100,000 on the mortgage, which everyone agreed the corporation would assume. Joe contributed $50,000 in cash plus the adjacent piece of land which he paid $150,000. Its appraisal stated a fair market value of $400,000. Joe received 450 shares of stock for his contribution of the cash and land. Matt contributed $50,000 in cash and provided legal services which would normally be billed out at $50,000. In exchange, he received 100 shares of stock. Joe argued that everyone has income to report on their personal income tax returns and that his basis in the stock is whatever he thinks it should be. Matt firmly believes his basis is $50,000 in the stock and has zero income to report. April isnt sure about any of it.

a) Calculate everyones taxable income resulting from the transfer of assets and services. Explain your reasoning, including applicable IRC sections.

b) Calculate everyones basis in the Harbor Corporations stock, referring to applicable IRC sections