Donovan Fisher will be incorporating his sole proprietorship this year and he wants to transfer the following assets into his C Corporation.

	FMV	Cost	Basis
Cash	30,000	30,000	30,000
Building	150,000	150,000	120,000
Equipment	50,000	70,000	50,000

Donovan has a tax rate of 40%. While he is planning to transfer all the assets to the corporation, he will be selling that building within a year and a half. The corporation will be at 28% at the time of the building sale. The FMV of the building will be slightly lower as a result of depreciation resulting in a FMV of $130,000 by the time he sells the building.

1) What would be the tax consequences if Donovan sells the building within 2 years of its TAX-FREE transfer to the corporation? Are there are any gains or losses and if so, how much?
2) Now, what would be the tax consequences if Donovan instead decides to sell only the building to the Corporation for $120,000 in promissory notes?