LO.1, 3 Elizabeth, Rod, June, and Whit form Zelcova Corporation with the following consideration:

Consideration Transferred Basis to Transferor Fair Market Value Number of Shares Issued From Elizabeth—

Personal services rendered to Zelcova Corporation $ –0– $ 30,000 30 From Rod—

Equipment 345,000 300,000 300 From June—

Unrealized accounts receivable –0– 150,000 130*

From Whit—

Land and building 210,000 450,000 Mortgage on land and building 300,000 300,000 150

*June receives $20,000 in cash in addition to the 130 shares.

Zelcova Corporation assumes the mortgage transferred by Whit. The value of each share of Zelcova stock is $1,000. As to these transactions, provide the following information:

a. Elizabeth’s recognized gain, income, or loss. Identify the nature of any such gain, income, or loss.

b. Elizabeth’s basis in the Zelcova stock.

c. Rod’s recognized gain or loss. Identify the nature of any such gain or loss.

d. Rod’s basis in the Zelcova stock. What election may Rod consider making as to his stock basis because the property he contributes to Zelcova has a built-in loss?

e. Zelcova Corporation’s basis in the equipment. What is the impact to Zelcova if Rod makes the election noted in part

(d) above?

f. June’s recognized gain or loss. Identify the nature of any such gain or loss.

g. June’s basis in the Zelcova stock.

h. Zelcova Corporation’s basis in the unrealized receivables.

i. Whit’s recognized gain or loss. Identify the nature of any such gain or loss.

j. Whit’s basis in the Zelcova stock.

k. Zelcova Corporation’s basis in the land and building.