C and D jointly organize Z Corporation. C transfers his property to Z in exchange for a $200 five-year note (which is a debt not equity) and half of Zs stock. D transfers $200 in cash to Z in exchange for the other half of Zs stock.

A. 351 covers the transfer. There is no gain or loss to recognize.

B. C must recognize gain on the property to the extent of amount realized minus the basis because 351 does not cover the transaction.

C. 351 covers the transaction; however, 351(b) requires C to recognize gain on the property to the extent of the boot received which is the $200 note. C may report this gain on the $200 note on the installment basis under section 453.

D. None of the above.