Scooby and Shaggy form Mistic, Inc. each receiving the following amount of Mistic stock (representing all of its outstanding stock) in exchange for the following property:

Common StockPreferred Stock

Scooby100Shares0 Shares

Shaggy0Shares100 Shares

ScoobyShaggy

Asset FMV$100,000$150,000

Asset Basis20,000100,000

Shaggy can require Mistic to redeem all of his stock at his option at any time for 1.5 times the value of 50% of Mistic's fair market value.The preferred stock has an 8% cumulative dividend rate but is otherwise nonparticipating in dividends and and nonparticipating in growth.

Required:Compute both Scooby and Shaggy's realized and recognized gain or loss on the transactions above.SHOW YOUR WORK AND EXPLAIN.