This year, Sally, Jordan, and Megan form SJM Corporation. Sally contributes land purchased as an investment for $25,000 that has a $30,000 FMV in exchange. Jordan contributes machinery and used in her business having a $50,000 adjusted basis and a $30,000 FMV. Megan contributes inventory having a $15,000 adjusted basis and a $30,000 FMV. Each shareholder receives 20 shares of stock in the corporation and each shareholder received a $10,000 note from the corporation.

a. What is the amount of each shareholder realized gain or loss?

b. What is the amount of each shareholder recognized gain or loss?

c. What is each shareholders basis in their stock? When does their holding period begin?

d. If each shareholder sold his/her stock tomorrow, how much gain or loss would each recognize? How does this gain/loss relate to parts a and b?

e. Prepare SJMs tax balance sheet

f. Prepare SJMs FMV balance sheet