Several years ago, your client, Brooks Robertson, started an office cleaning service. His business was very successful, owing much to his legacy as the greatest defensive third baseman in major league history and his nickname, "The Human Vacuum Cleaner." Brooks operated his business as a sole proprietorship and used the cash method of accounting. Brooks was advised by his attorney that it is too risky to operate his business as a sole proprietorship and that he should incorporate to limit his liability. Brooks has come to you for advice on the tax implications of incorporation. His balance sheet is presented below. Under the terms of the incorporation, Brooks would transfer the assets to the corporation in return for $100$ percent of the company's common stock. The corporation would also assume the company's liabilities $($payables and mortgage$).$ Balance Sheet Adjusted tax basis FMV Assets Accounts receivable $ $0$ $ $16,000$ Cleaning equipment $($net$)36,00031,000$ Building $72,00086,000$ Land $36,00061,000$ Total assets $ $144,000$ $ $194,000$ Liabilities Accounts payable $ $0$ $ $21,000$ Salaries payable $016,000$ Mortgage on land and building $46,00046,000$ Total liabilities $ $46,000$ $ $83,000$ Required: Answer the following questions: How much gain or loss $($on a per$-$asset basis$)$ does Brooks realize on the transfer of each asset to the corporation? How much, if any, gain or loss $($on a per$-$asset basis$)$ does Brooks recognize? How much gain or loss, if any, must the corporation recognize on the receipt of the assets of the sole proprietorship in exchange for the corporation's stock? What tax basis does Brooks have in the corporation's stock? What is the corporation's adjusted tax basis in each asset it receives from Brooks?c$.$ How much gain or loss, if any, must the corporation recognize on the receipt of the

exchange for the corporation's stock?

d$.$ What tax basis does Brooks have in the corporation's stock?

Note: For both requirements, negative amounts should be indicated by a minus sign.

applicable.

c$.$ Gain or loss recognized

d$.$ Tax basis