Coconut, Plum, and Mulberry form Fruit Corporation with the following transfers.

	Adjusted basis	Fair market value
From Coconut -
Cash	$116,000	$116,000
Inventory	70,000	98,000
From Plum -
Land and building	120,000	253,000
From Mulberry -
Accounting services to incorporate	-0-	44,000
Equipment	80,000	85,000

Fruit Corporation issues its 800 shares of stock as follows: 288 to Coconut, 336 to Plum, and 176 to Mulberry. In addition, Plum gets $42,000 in cash.

Instructions: Answer each of the following questions. Explain your answers. Show and label your calculations.

1. Does Coconut recognize gain (or income)?
2. What basis does Coconut take in the Fruit Corporation stock?
3. What basis does Fruit Corporation take in the inventory?
4. Does Plum recognize gain (or income)?
5. What basis does Plum take in the Fruit Corporation stock?
6. What basis does Fruit Corporation take in the land and building?
7. Does Mulberry recognize gain (or income)?
8. What basis does Mulberry take in the Fruit Corporation stock?
9. What basis does Fruit Corporation have in the equipment?