Facts Applicable to Questions 1-3: 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; and (ii) inventory held for sale to customers in the ordinary course of Donalds 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 Newcos 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 Donalds A/B in the Newco shares received in this transaction (measured immediately after the exchange)?

3. What is Donalds holding period in the Newco shares received in this transaction (determined immediately after the exchange)?