Jane and Walt Form Yellow Corporation

Multiple Choice

Jane and Walt form Yellow Corporation. Jane transfers equipment worth $950,000 (basis of $200,000) and cash of $50,000 to Yellow Corporation for 50% of its stock. Walt transfers a building and land worth $1,050,000 (basis of
$400,000) for 50% of Yellow's stock and $50,000 in cash.

A) Jane recognizes no gain; Walt recognizes gain of $50,000.
B) Jane recognizes a gain of $50,000; Walt has no gain.
C) Neither Jane nor Walt recognizes gain.
D) Jane recognizes a gain of $750,000; Walt recognizes gain of $650,000.
E) None of these.