Rosita Lopez is an attorney and also owns two rental properties. In August 2017, she learned that a property in New York City was for sale. The owner, Central Corporation, wanted to sell the property and told Rosita that the City of New York was renting a large part of the 19-floor building but the lease had expired and the City had a right to continue its occupancy for the next year. Central had tried, unsuccessfully, to negotiate a new 10-year lease with the City at a higher rate. By the end of September a new lease with the City was agreed to and a purchase agreement was drawn up. The bank holding the mortgage on the building agreed to increase the mortgage for Rosita and she agreed to pay all closing and other costs to close the deal and made a small earnest money payment in 2017. Closing on the building will take place January 3, 2018 at which time the deed will be listed in Rositas name and the mortgage holder will be listed.

On November 1, 2017 Rosita organized Northwest Corporation with 1,000 no par value common stock. Rosita transferred only the purchase agreement and received 500 shares of Northwest Corporation. Northwest issued 300 shares to an unrelated individual for cash and the remaining 200 shares were issued to an investment banker, also unrelated, for cash. Closing on the building will occur on January 3, 2018.

a. Discuss the tax consequences (recognized gain/loss, basis of stock received and basis of assets) for Rosita and Northwest Corporation for 2017. Be sure to fully explain your solution.