Betty joined Jim in forming DBJ Corp. Betty contributed appreciated land for 90 percent of the stock in DBJ Inc. Jim received 10 percent of the DBJ stock valued at $31,500. Determine Jim's tax consequences in each of the following alternative scenarios.

1.

a-1. Jim received the stock in exchange for providing computer-related services for the corporation. What amount of income or gain does Jim recognize on the exchange?

a-2. What is Jim's basis in the stock he received in the exchange?

2.

b-1. Jim contributed the rights to a patent he owned to DBJ in exchange for the DBJ stock. The patent was worth $31,500 and Jim's basis in the patent was $20,525. How much gain does Jim recognize on the exchange?

b-2. What is Jim's basis in the DBJ stock?