Tiny Co operates a motel business and has the following assets.

	Fair market value	Basis
Tangible personal property (equipment, inventory etc.)	$20,000	$10,000
Real property (land and building)	$120,000	$80,000
Goodwill	$20,000	$0

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The building is subject to a mortgage of $20,000.

Tiny Co is 100% owned by Abby, whose basis in Tiny Co is $50,000.

Pursuant to a plan, Pop Co and Tiny Co plan to enter into the following transactions: Pop Co will form a corporation, Speed Co, with $20,000 cash; Speed Co will merge into Tiny Co, with Tiny Co surviving; in exchange, Abby will receive $120,000 worth of Pop Co voting stock and $20,000 cash contributed by Pop Co.

1. Whats the characterization of the transaction and why?

2. Whats the tax treatment to Tiny Co?

3. Whats the tax treatment to Abby?

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