Jeff owns a small successful restaurant. He wants to expand but needs a second location. He thinks his business has an FMV of $3,000,000 (and has a basis of $500,000 to Jeff). The business is currently an LLC.

Thomas is a real estate broker and investor. He normally buys real estate and sells it quickly. He is fully licensed as a real estate broker in Texas. Thomas has a vacant lot that he paid 2,500,000 three years ago. The FMV is currently $2,000,000.

No one wants to have a recognized gain from this transaction this year, but if there is a loss to be had- the earliest the better.

Jeff approaches Thomas about the following business proposition: the restaurant and the land are contributing to a new corporation. Jeff gets 60% of the stock and Thomas gets 40% of the stock.

Thomas is not sure he likes that idea and instead offers the following (this occurs when Thomas is added to the new Corporation):

The corporation will distribute out to Thomas a part of the parking lot (of the old location). The FMV is $400,000 and the basis to the corp is $675,000. Thomas will contribute the new land for stock. Client also has this question: what is the amount of stock should Thomas get in the corp?

Keep in mind Thomas wants to own part of the restaurant- he thinks it will be successful.

What is the income tax consequences for idea #5? Please provide a calculation and written answer for this question.