Gunnar is an individual in the 25% tax bracket. His preferential tax rate is 15%. He acquired 1,500 shares in Kolakowski Corporation three years ago for $25 per share. In the current year, Gunnar received a payment of $20,000 from Kolakowski in exchange for 500 of his shares. Kryk, Inc. is a C corporation that also acquired 1,500 shares of Kolakowski Corporation for $25 per share. Kryk owns 50% of the stock in Kolakowski.

What is Abbey's basis in her stock? A. $0 B. $40,000 C. $60,000 D. $100,000

How much gain or income will Abbey recognize? A. $0 B. $40,000 C. $60,000 D. $100,000

How much gain or income will Erica recognize? A. $0 B. $10,000 C. $45,000 D. $55,000

What is Erica's basis in her stock? A. $0 B. $65,000 C. $75,000 D. $110,000