cIn the current year,

John,

Sue,

and

Fred

form

Air

Corporation.

John

contributes land (a capital asset) having a

$15,000

FMV

purchased as an investment four years ago for

$10,000

in exchange for

15

shares of

Air

stock.

Sue

contributes machinery (Sec. 1231 property) purchased four years ago and used in her business in exchange for

15

shares of

Air

stock. Immediately before the exchange, the machinery had a

$60,000

adjusted basis and a

15,000

FMV.

Fred

contributes services worth

$30,000

in exchange for

30

shares of

Air

stock.