Assume Paul, George, and Sarah form Corporation XYZ. Paul contributes land with an AB of $300 and FMV of $1000. George equipment with an AB of $500 and FMV of $1000. Sarah contributes service worth $1000. Each person receives and owns 33.33% of the shares.

What are the tax consequences? (e.g., recognized gain or loss, basis in stock received, the corporation's basis in the property) Explain it would to would not qualify.

Instead of $1000 of services, assume Sarah contributes $500 worth of services and $500 cash.

What are the tax consequences? Explain it would to would not qualify. Would this change the results? You would need to explain how the applicable tax provision (Section 351) applies to this set of facts and circumstances.