I (1) Adams, Block, Smith and Jones are desirous of joining together in a business. They choose to do business in a corporate form. On February 1, 2012, they form Mfg. Corp. with each contributing the following in exchange for Mfg. Corp. voting common stock and non-voting preferred stock:

Stockholder	Contributions	Shares Received
		Common	Preferred
Adams	Machinery & Equip. FMV $40,000 Basis $12,000	200	200
Block	Cash - FMV $40,000	200	200
Smith	Services - FMV $20,000	100	100
Jones	Land & Building FMV $100,000 Basis $38,000	500	500

What are the tax consequences to the corporation and the stockholders?

(a) Assume Jones did not contribute his land and building until April 1, 2012. What effect will this have upon your answer in part (1)?

(2) Assume that Adams, Block & Smith, having formed Mfg. Corp. on February 1, 2012, and having received the ownership interest set out in part (1), decide on March 1, 2012, that it would be a good idea if Mfg. Corp. owned its own factory. They contact Jones who contributes his land and building on April 1, 2012, in exchange for the ownership interest set out in part (1):

(a) What are the tax consequences to Adams, Block, Smith, Jones and Mfg. Corp. under these facts?

(b) Assume that Adams, Block & Smith each contribute an additional $1,000 on April 1, 2012, to Mfg. Corp. These contributions result in each of them receiving an additional 5 shares of common stock and 5 shares of preferred stock. The additional contributions are directly related to Jones' contribution of his land and building. How would this affect your answer to part (a)?

(c) What effect, if any, would it have on your answer to part (a), if Adams, Block & Smith had received the following shares of stock on February 1, 2012:

	Shares Received
Stockholder	Common	Preferred
Adams	225	175
Block	225	175
Smith	50	150

(d) If Jones' building had a FMV of $400,000 and he received 2,000 shares of voting common and 2,000 shares of non-voting preferred, how would that affect your answer to part (a)?