For each of the following corporate formations, (1) write the amount of gain or loss that will be recognized by the shareholders as a whole, and (2) write the corporation’s basis in the property after the transfer.
a. John and Kelly started Back Stop, Inc., in 2021. Kelly transferred a building with a basis of $120,000 and a FMV of $150,000 for 60% of the stock.
b. John agreed to operate the company on a day-to-day basis in exchange for his stock. Ignore any compensation income recognized by John.