Assume all of the same facts as Problem 1 above, except that each will receiving 25% of the common stock for their contributions of property and services.

1) What are the tax consequences of this deal (gains/losses/income recognized, basis of shareholders in stock, basis of corporation in property)? 2) How might the transaction be structured differently in such a case to provide for a more favorable tax result for the shareholders? What if David gave $25,000 cash as well as his services for his 25% interest?

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