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

Shareholders basis in the shares of stock received

Shareholders basis in the bonds received

Corporations 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.