In the current year, Mick, Hank, and Dawn form Ares Corporation. Mick contributes land (a capital asset) having a $62,500 FMV in exchange for 25 shares of Ares stock. He purchased the land three years ago for $100,000. Hank contributes machinery (Sec. 1231 property purchased four years ago) having a $115,000 adjusted basis and a $37,500 FMV in exchange for 15 shares of Ares stock. Dawn contributes services worth $25,000 in exchange for 10 shares of Ares stock.

a. What is the amount of Mick's recognized gain or loss?

b. What is Mick's basis in his Ares shares? When does his holding period begin?

c. What is the amount of Hank's recognized gain or loss?

d. What is Hank's basis in his Ares shares? When does his holding period begin?

e. How much income, if any, does Dawn recognize?

f. What is Dawn's basis in her Ares shares? When does her holding period begin?

g. What is Ares's basis in the land and the machinery? When does its holding period begin? How does Ares treat the amount paid to Dawn for her services?