M, N, and O quit their jobs this year and started a business selling and servicing lawn mowers and garden equipment.

a. M contributed machinery worth $10,000 (basis $12,000) for 10 shares of stock, and N contributed equipment worth $20,000 (basis $15,000) for 20 shares of stock. O agreed to be in charge of the service department and received 20 shares for services to be performed during the first year of business. Does the exchange qualify for special tax treatment provided by section 351?

b. Same as (a), except that O received 5 shares.