Jones, Able, and Smith want to form Shriver Corporation. They want to accomplish this in the most tax efficient

(least costly) way possible. They have asked for advice. The counselor will receive $10,000 (in stocks and bonds). The relevant information follows. Each bond has a face value of $2,500.

Determine all tax consequences for Jones, Able, Smith, the counselor, and Shriver Corporation assuming the transfer occurred in the current year. Also assume that Jones, Able, and Smith are unrelated parties.

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PARTY GIVES Jones Machine $100,000 Land PARTY Fair Market Adjusted Value Basis $70,000* 40,000 20,000 (1) 25 shares of stock Building 65,000 45,000** (2) $20,000 *Acquired for $85,000; straight-line depreciation taken. Acquired for $70,000; straight-line depreciation taken; liability of $60,000 is assumed by Shriver Corporation. Building GIVES Fair Market Able Value Machine $70,000 $80,000* 50,000 65,000** RECEIVES Adjusted Basis RECEIVES (1) Eight shares of stock (2) Two 10-year bonds (3) $5,000