3. Sean, a sole proprietor, has been engaged in a construction business for many years. While he once was pretty handy he is now a jack of all trades and a pretty good businessman. His brother Kyle is a plumber and his brother Michael is an electrician. Sean attended a local college law course and was concerned about potential liability, and he also things he wants to grow this business and may want to bring new investors in! His professor referred Sean to a local law firm - Dewey, Screwem & How - with significant experience in helping people set up new corporations.

After paying these lawyers a discounted rate of $700/hour, Sean incorporates his business by forming East Side Construction Inc. (ESCI). In exchange for (a) all of its stock (FMV $600,000) and (b) ESCIs note payable of $400,000, ESCI receives Seans construction business assets (basis of $200,000 and fair market value of $1 million).

a.	Does Sean recognize any gain on the incorporation? ________If so, how much? _______. Explain.
b.	What basis does Sean have in the ESCI stock? _________
c.	What basis does ESCI have in the assets it receives from Sean? ____________