Kirby and Helen form Red Corporation. Kirby transfers property, basis of $20,000 and value of $300,000, for 100 shares in Red Corporation. Helen transfers property, basis of $40,000 and value of $280,000, and provides legal services in organizing the corporation. The value of her services is $20,000. In return, Helen receives 100 shares in Red Corporation. With respect to the transfers,

1. Kirby will recognize gain. 2. Helen will not recognize any gain or income. 3. Red Corporation will have a basis of $280,000 in the property it acquired from Helen. 4. Red will have a business deduction of $20,000. 5. None of the above