Frank and Jessie plan to organize a corporation to operate a college textbook store, which will be named Fleecem Folios, Ltd. They will each engage in the exchanges described below. What are the tax consequences to Frank, Jessie, and Fleecem Folios that result from the formation of the corporation? Specifically, how much, if any, gain must each recognize; what is the basis to each shareholder in the stock received; and what is the corporations basis in the assets received by it?(

1. Jessie will contribute land previously held as an investment on which the new corporation will build a store. The land has a fair market value of $350,000 and a basis of $260,000. Jessie will receive 10 shares of common stock and the corporation will assume a $100,000 debt Jessie owed to the First National Bank of Northfield.

a.Assume that Jessies debt was incurred four years ago to pay gambling debts incurred in Atlantic City and is unsecured.

b.Assume alternatively that Jessies debt to the First National Bank of Northfield was secured by a mortgage on the land.

c.Assume alternatively that the land was used as a parking lot and Jessies debt was unsecured but was incurred last year to fund deductible operating expenses of the now failed sole proprietorship parking lot business in connection with which Jessie previously had used the land.