On January 4, 2016, Martin Corporation acquires two properties from a shareholder in a transaction that qualifies under 351. The shareholders basis, the fair market value, and the built-in gain (loss) of each property are:

Shareholders Basis Fair Market Value Built-In Gain (Loss)

Property 1 $300,000 $375,000 $ 75,000

Property 2 525,000 400,000 (125,000)

Net built-in loss ($ 50,000)

Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 30% shareholder when the property is worth $350,000.

a. Compute Martins basis in Property 1 and in Property 2 as of January 4, 2016.

b. Compute Martins realized and recognized loss on the liquidating distribution of Property 2.