sean and john form chris Corporation. sean transfers inventory (basis of $60,000 and FMV of $110,000) for 50% of the stock in Pine. John transfers machinery (basis of $20,000 and FMV of $60,000) and agrees to serve as manager of chris Corporation for one year for 50% of the stock. John's management services are worth $50,000. What are the tax consequences tochrisCorporation with respect to Johnss contribution?

chris Corporation expenses $50,000 of johns services and takes a $20,000 adjusted basis in the machinery.

chris Corporation expenses $50,000 of johns services and takes a $60,000 basis in the machinery.

None of these answers are correct.

chris Corporation capitalizes $50,000 of Johns services as organizational/start-up costs, expenses them according to section 195, and takes an adjusted basis of $60,000 in the machinery.

Chris Corporation capitalizes $50,000 of Johns services as organizational/start-up costs, expenses them according to Section 195, and takes an adjusted basis of $20,000 in the machinery.