Lisa, who is single, transfers property with an $86,000 basis and a $118,000 FMV to Portrait World Co. in exchange for all 175 shares of Portrait World stock. The shares qualify as Sec. 1244 stock. Two yaers later, Lisa sells the stock for $32,000.

Requirements

1. What are the amount and character of Lisa's recognized gain or loss?

2. How would you answer to Part 1 change if the FMV of the property were $60,000?