Jack and Jill are friends that form a company called Gingerbread Corp. Mike, Jill's brother wants to participate in the business venture and provides $133,000 in services.

Jack will contribute the following assets to Gingerbread: Total Tax Basis: 1,625,000 and FMV: 2,375,000

Jill will contribute the following assets to Gingerbread: Total Tax Basis: 230,000 and FMV: 1,680,000

Mike will contribute the following assets to Gingerbread: Total Tax Basis: 630,000 and FMV: 240,000

Gingerbread will issue stock as follows:

16800 shares of common stock, 100 par value, issued to Jack

16800 shares of common stock, 100 par value, issued to Jill

3730 shares of common stock , 100 par value, issued to Mike

Because Jack has contributed assets to Gingerbread with a fair market value of $2,375,000 in exchange for stock with a fair market value of $1,680,000, he will receive cash from Gingerbread of $695,000 upon its formation.

Jill also borrows a $400,000 loan to cover costs.

Based on the fact patterns, answer the short questions below:

a How much gain (loss) will Mike realize on the contribution of the assets and services to Gingerbread?

b. How much gain (loss) will Mike recognize on the contribution of the assets and services to Gingerbread? [hint: you should consider how services will be treated for tax purposes]

c. What will be Mike's basis in the 3,730 shares of Gingerbread common stock he receives?

d. How much gain (loss) will Gingerbread recognize on Jacks contribution of assets to Gingerbread?

e. How much gain (loss) will Gingerbread recognize on Jills contribution of assets to Gingerbread?

f. How much gain (loss) will Gingerbread recognize on Mikes contribution of assets and services to Gingerbread? [hint: you should consider how services will be treated for tax purposes]