Donald conducts a trade or business as a sole proprietorship with the following assets: 

(i) A building constituting Section 1231 property with FMV of $750,000 and A/B of $200,000; 

(ii) Inventory held for sale to customers in the ordinary course of Donald’s trade or business with FMV of $250,000 and A/B of $150,000. Donald contributes the building and the inventory to a corporation (“Newco”) in exchange for 100% of Newco’s stock.

1. How much gain (if any) is recognized by Donald upon the exchange? As part of your answer, please indicate the character of any such gain.
2. What is Donald’s A/B in the Newco shares received in this transaction (measured immediately after the exchange)?

What is Donald’s holding period in the Newco shares received in this transaction (determined immediately after the exchange)?