Jeff (cash method) will incorporate his bike shop:

	FMV	Tax Basis	Book Basis
Cash	$200,000	$200,000	$200,000
FFE	$225,000	$75,000	$185,000
Inventory	$250,000	$115,000	$115,000
Building	$700,000	$300,000	$200,000

Liabilities (Accounts Payable): $50,000

AND: a bank loan of $500,000 on the building (all business purpose)

BOTH liabilities were transferred to the new corporation.

1.

A: What is his realized gain/ loss?

B: What are his recognized gain/ loss without Section 351?

C: What are his recognized gain/ loss with Section 351?

2.

A: What is Jeff’s basis in his new stock assuming Section 351 was used?

B: What is the Corporations basis in its new assets and liabilities assuming Section 351 was used?