This year, John, Meg, and Karen form Frost Corporation. John contributes land purchased as an investment four years ago for $15,000 that has a $30,000 FMV in exchange for 30 shares of Frost stock. Meg contributes machinery (Sec. 1231 property) purchased four years ago and used in her business having a $35,000 adjusted basis and a $30,000 FMV in exchange for 30 shares of Frost stock. Meg had purchased the machinery 4 years ago; $10,000 of depreciation has been claimed by Meg prior to the exchange. Karen contributes services worth $20,000 in exchange for 20 shares of Frost stock.

a) What is the amount of Megs realized gain or loss?

b) What is the amount of Karens realized gain or loss?