Sam and Devon agree to go into business together selling college-licensed clothing. According to the agreement, Sam will contribute inventory valued at $136,000 in return for 80 percent of the stock in the corporation. Sam's tax basis in the inventory is $95,000. Devon will receive 20 percent of the stock in return for providing accounting services to the corporation (these qualify as organizational expenditures). The accounting services are valued at $34,000.

a. What amount of income, gain, or loss does Devon realize on the formation of the corporation? What amount, if any, does Devon recognize?

Income, gain, or loss realized
Income, gain, or loss recognized