In 2021, Alphonse and Erica form AE, Inc., a C-corporation. Erica contributed $100,000 in cash in exchange for 1,000 shares in AE. Alphonse contributed an asset with a fair market value of $120,000 and an adjusted basis of $140,000 in exchange for $20,000 of cash and 1,000 shares of AE stock.

Question 16 options:

	Alphonse will recognize a $20,000 gain.
	Alphonse will recognize a $20,000 loss.
	Alphonse's basis in AE stock is $140,000. AE basis in the property contributed by Alphonse is $140,000.
	Erica's basis in her AE stock is $100,000 and Alphonse's basis in his AE stock is $100,000.
	None of the above.