Sarah and Tony (mother and son) form Dove Corporation with the following investments: cash by Sarah of $65,000 and land by Tony (basis of $25,000 and FMV of $35,000) Dove Corporation issues 400 shares of stock, 200 each to Sarah and Tony. Thus, each receives stock in Dove worth $50,000.

WHICH OF THE FOLLOWING IS CORRECT:

a. Section 351 cannot apply since Sarah should have received 260 shares instead of only 200.

b. Section 351 may apply because stock need not be issued to Sarah and Tony in proportion to the value of the property transferred.

c. Tony's basis in the stock of Dove Corporation is $50,000.

d. As a result of the transfer, Tony recognizes a gain of $10,000.

e. None of the above.