Skyler White forms Laundry Corporation by transferring a building (basis of $133,000; fair market value of $775,000) which is subject to a mortgage of $249,000. Two weeks prior to incorporating Laundry Corporation, Skyler borrows $124,000 for personal purposes and gives the lender a second mortgage on the building. Laundry Corporation issues stock worth $402,000 to Slyer and assumes the two mortgages on the building.

NOTE - for the requirements below, solving for tax consequences here means you must find recognized gain and stock basis (for Skyler), and you must find property basis (for Laundry Corporation).

REQUIRED - solve the following two parts & sub-parts

A.) Assuming this transaction qualifies under $ 351:

a1 What OTHER code section will need to be considered in this scenario? Give the code section and a one-sentence explanation as to why it must be considered.

a2 What are the tax consequences to Skyler and to Laundry Corporation?

B.) Now, still assuming this transaction qualifies under 351, use the same exact scenario, EXCEPT, Skyler borrows the $124,000 for business purposes.

b1 What OTHER code section will need to be considered in this scenario? Give the code section and sentence explanation as to why it must be considered.

b2 What are the tax consequences to Skyler and to Laundry Corporation now?