12. LO.4 Phillip and Evans form a business entity. Each contributes the following property.

Phillip Evans Cash $600,000 Land $600,000*

* Fair market value. Evans’s adjusted basis is $200,000.

Three months later, the entity sells the land for $652,000 because of unexpected zoning problems. The proceeds are to be applied toward the purchase of another parcel of land to be used for real estate development. Determine the Federal income tax consequences to the entity and to the owners upon both the formation and the later sale of the land. Perform your analysis assuming that the entity is:

a. A partnership.

b. An S corporation.

c. A C corporation.