Elizabeth, an engineer, provides services to the corporation in exchange for 50% of the stock. Lauren transfers land with a basis of $40,000 and a market value of $100,000. He also receives 50% of the stock.

Taking the situation as it is; answer the following questions:

What is the amount and character of Elizabeths recognized gain/loss?

What is the amount and character of Laurens recognized gain/loss?

Devise a specific plan that will help Lauren. Hint: think about manipulating the 80% rule. How would you IRS challenge your plan? Be specific.