Items Transferred The common stock has voting rights. The preferred stock does not. (FMV = Fair market value) Requirement a. Is the exchange nontaxable under Sec. 351? Explain the tax consequences of the exchange to Fredo, Chris, Rick, and Palm Tree. Fredo recognizes Chris recognizes Rick recognizes Palm Tree recognizes as nontaxable under Sec. 351. on the transfer of the patent. Fredo's basis in his Palm Tree stock is Chris's basis in the preferred stock is Rick's basis in his Palm Tree stock is on the exchange. Palm Tree's basis for the assets are: Requirement b. How would your answer to Part a change if Chris instead had received 260 shares of common stock and 235 shares of preferred stock? as nontaxable under Sec. 351 . Fredo recognizes Chris recognizes Rick recognizes Palm Tree recognizes Fredo's basis in his Palm Tree stock is ] Chris's basis in his Palm Tree stock is Rick's basis in his Palm Tree stock is on the exchange. Palm Tree's basis for the assets are: Requirement c. How would your answer to Part a change if Rick instead had contributed $3,500 cash as well as services worth $5,500 ? as nontaxable under Sec. 351. Fredo recognizes Chris recognizes Fredo's basis in his Palm Tree stock is Chris's basis in his Palm Tree stock is Rick recognizes Palm Tree recognizes Rick's basis in his Palm Tree stock is on the exchange. Palm Tree's basis for the assets are