Problem 18-35 (LO. 1, 7) Rhonda owns 50% of the stock of Peach Corporation. She and the other 50% shareholder, Rachel, have decided that additional contributions of capital are needed if Peach is to remain successful in its competitive industry. The two shareholders have agreed that Rhonda will contribute assets having a value of $200,000 (adjusted basis of $15,000) in exchange for additional shares of stock. After the transaction, Rhonda will hold 75% of Peach Corporation and Rachel's interest will fall to 25%. a. What gain is realized on the transaction? How much of the gain will be recognized? b. Rhonda is not satisfied with the transaction as proposed. Assume Rachel agrees to transfer $1,000 of cash in exchange for additional stock. In this case, Rhonda will own slightly less than 75% of Peach and Rachel's interest will be slightly more than 25%. How will the consequences change? Rhonda's plan to avoid recognizing a gain | the value of the stock she would receive is be successful. Rachel's interest be counted, since compared to the value of the stock she already owns. c. If Rhonda still is not satisfied with the result, what should be done to avoid any gain recognition? Rhonda can transfer property that appreciated in value. Rachel could contribute property of an amount that small relative to the value of the stock already owned.