1. Elias and Susana form a Corporation (E & S Manufacturing, Ltd.) in 2019. Elias contributed a machine with a fair value of $60,000 and a basis to him of $9,000 to the corporation in exchange for 40 shares of common stock and $30,000 cash. The machine originally cost Elias $50,000. Susana contributed a Patent with a zero basis and a fair value of $40,000 in exchange for 40 shares of common stock. No other shares were issued.

Explain the tax effects on both of them and the Corporation including their respective gains, losses, the nature of those items and the basis in the assets they now hold and holding period.