Larry and Moe operate a partnership but decide to incorporate it and bring along Krista as part of the group of incorporating shareholders. Krista will provide valuable legal services in incorporating the venture. The value of her services is determined to be $20,000. Krista will also contribute securities with a value of $10,000 and a basis of $6,000. The two remaining individuals contribute the following to the corporation:

Shareholder	Property	Basis	Value
Larry	Equipment	$20,000	$35,000
Moe	Cash	25,000	25,000
	Equipment	2,000	10,000

Moe and Larry will each own 35% of the stock and Krista will own 30% of the stock. Pick the true statement from the list below.

Question options:

	Krista alone will recognize income of $20,000 from her services and the basis of her stock will be $26,000.
	None of the shareholders will recognize gain from the incorporation and property transfer
	All of the shareholders will recognize gain from the transfer of assets to the corporation.