Determine the tax consequences to each shareholder and the corporation and show supporting computations. Your answers should include:

• Gain/loss realized by each shareholder
• Gain/loss recognized by each shareholder (consider effect of Rev. Rul. 68-55)
• Character of any gain/loss recognized by each shareholder
• Shareholder's basis in the shares of stock received
• Shareholder's basis in the bonds received
• Corporation's basis in the assets received
• The tax treatment of any other income, loss, deductions, etc. recognized by the corporation or shareholder.

1. In the current year, Xavier and Yolanda formed XY Corporation. Xavier contributed $500,000 cash and Yolanda contributing the following property:

	Basis	FMV
Land	$20,000	$175,000
Building	60,000	525,000

Both shareholders received 100 shares of common stock and the corporation assumed a $200,000 purchase money mortgage secured by the land and building.