Please adivse. I do not know how to get the anwer. It is a tax question. However, it will not allow me to choose tax as a subject.

Corporate Tax Prof. Beller Discussion Problem No. 1 Al Adams has directly owned and operated, since 2004, a wholesale auto parts business that supplies parts to independent automobile repair shops in City X. The business is conducted out of a warehouse building acquired by Al in 2006 for $100,000, $80,000 of which was financed through a first mortgage loan. Al also owns free and clear an adjacent parcel of land that he purchased in 2007 for $50,000 and expects to develop in connection with future expansion of the business. In late 2009, Al obtained a $15,000 bank loan, the entire proceeds of which were used as working capital for the business. As of December 31, 2009, the proprietorship balance sheet for Al's Auto Parts showed the following assets and liabilities: Assets Cash Trade A/R Parts Inventory Warehouse Bldg. (net of $10,000 depreciation) Delivery Trucks (net of $5,000 depreciation) Vacant Parcel 45,000 100,000 350,000 90,000 20,000 50,000 Liabilities Trade A/P Mortgage Loan Unsecured Bank Loan 250,000 70,000 15,000 Al reports the income and expenses of the business on Schedule C of his Form 1040 individual federal income tax return. The current fair market values of the warehouse, the delivery trucks and the parcel of land are $110,000, $12,000 and $40,000, respectively. The aggregate wholesale value of the parts inventory is $425,000. 16300635.1 -2Effective January 1, 2010, Al transfers all of the assets and liabilities of the business to a newly formed corporation, AAP, Inc., in exchange for 100 shares of AAP common stock. AAP assumes the mortgage loan and becomes a co-signer on the bank loan. (1) Does Al recognize any gain or loss on the incorporation transfers? What about AAP? (2) What is Al's tax basis and holding period in the AAP stock? (3) What is AAP's tax basis and holding period in the transferred assets? (4) Different result if Al elects \"S\" corporation status for AAP? (5) What if Al transfers only $20,000 of the cash to AAP and uses the rest to buy a new family car? 16300635.1