Choice Corp. decides to incorporate one of its divisions. As a result, assets with a basis of \(\$ 200,000\), but worth \(\$ 800,000\), and liabilities of \(\$ 325,000\) are transferred to a new corporation, Prime Inc., in exchange for all its stock. The stock in Prime is then distributed to the shareholders of Choice.

a. What gain is realized by Choice Corp.?

b. What gain is recognized by Choice Corp.?

c. What is Prime's basis for the assets received from Choice?

d. What is Choice Corp.'s basis for the stock in Prime?

e. A shareholder who owns Choice stock with a basis of \(\$ 4,500\) and a fair market value of \(\$ 7,000\), receives stock in Prime worth \(\$ 2,000\). What is her basis and holding period for the Prime stock she received?