On January 1, 2019 , Jerry Fallen transfers publicly traded debt securities with a fair market value of

$570,000 to a newly established inter vivos trust for which his 22 year old son, James, is the only

beneficiary. The cost of these securities to Jerry was $520,000. During 2019 , the securities earn and

receive interest of $32,000, all of which is distributed to James.

On January 1, 2020, the securities are transferred to James in satisfaction of his capital interest in the

trust. At this time, the fair market value of the securities has increased to $615,000. James sells all of

the securities for $615,000 on January 3, 2020.

Indicate the tax consequences for Jerry, James, and the trust, in each of the years 2019 and 2020