explain why A is the correct answer, show works

Brad forms Vott Corporation by contributing equipment, which has a basis of $50,000 and an FMV of $40,000 in exchange for Vott stock. Brad also contributes $5,000 in cash. If the transacts meets the Sec. 351 control and ownership tests, what are the tax consequences to Brad? He recognizes neither a gain nor a loss. He recognizes a $5,000 loss. He recognizes a $5,000 gain and a $10,000 loss. He recognizes a $10,000 loss