QUESTION 2

Shirley and Deidre, individual taxpayers, form Lenise Corporation. Shirley transfers property (Equipment) (Adjusted Basis of $150,000 and Fair Market Value of $90,000) with a debt on the property of $70,000 while Deidre transfers a parcel of Land (Adjusted Basis of $80,000 and Fair Market Value of $50,000) and $50,000 in Cash. Each receives fifty percent (50%) of Lenise Corporation's stock which is worth a total of $60,000. As a result of these transfers, which of the following is correct?

Shirley has a Recognized Gain of $20,000 but Deidre has no Recognized Loss.Neither Shirley nor Deidre have any Recognized Gain or Recognized Loss.Shirley has a Recognized Gain of $20,000 and Deidre has a Recognized Loss of $30,000.Lenise Corporation will have a basis in the Land of $130,000