Two shareholders transfer property to a corporation in exchange for 100% of the corporate stock. Shareholder #1

transfers property with a basis of $50,000 and a value of $80,000 for 2/3rds of the corporate stock. Shareholder #2 performs incorporation and other startup services for the corporation (valued at $40,000) for 1/3rd of the stock.

SELECT THE TRUE STATEMENT FROM THE LIST BELOW!!

Only Shareholder 1's contribution is completely nontaxable.

Only Shareholder 2's contribution is taxable

Both shareholders' contributions are nontaxable

) Both shareholders' contributions are taxable