Question $62$

Leah transfers equipment $($basis of $$400,000$ and fair market value of $$500,000)$ for additional stock in Crow Corporation. After the transfer, Leah owns

$80\%$ of Crow's stock. Associated with the equipment is $1245$ depreciation recapture potential of $$70,000.$ As a result of the transfer:

The $1245$ depreciation recapture potential disappears.

Leah recognizes ordinary income of $$70,000.$

The $1245$ depreciation recapture potential carries over to Crow Corporation.

Leah recognizes ordinary income of $$70,000$ and $1231$ gain of $$30,000.$