Dan Knight and Patricia Chen, who are good friends, form Crane Corporation. Dan transfers land (worth $200,000, basis of $60,000) for 50% of the stock in Crane. Patricia transfers machinery (worth $150,000, adjusted basis of $30,000) and provides services worth $50,000 for 50% of the stock.

* What are the tax consequences to Dan and Patricia? Please show solutions.

Patricia recognizes $_______________ on the transfer. Patricia has a basis of $____________ in her Crane stock.

* What is Crane Corporation's basis in the land and the machinery? Please show solutions.

Crane Corporation has a basis of $__________ in the land and a basis of $___________ in the machinery. Crane either has a deduction of $___________ for the services provided by Patricia, or it will capitalize the $______________ as organizational costs.