C contributes to Z, a newly formed corporation, property worth $400 with a basis of $300 in exchange for 100 shares. D(an employee of C) contributes to Z property worth $100 with a basis of $40 in exchange for $400 shares.

a This is most likely not a good 351. C must recognize $100 of gain and D $50 of gain.

b. This is not a good 351 transaction because receipt of stock is disproportionate to the property contributed.

cThis is good 351 transaction. C and D will not recognize gain on the transfers to Z.

d C must have also transferred property to D (and employee after the incorporation). Most likely this would be a transfer of 300 shares to D. Gain to C would be $75

e C and D

Which is the correct answer?