In the current year, Tom , Jay , and Dana form Ares Corporation. Tom contributes land (a capital asset) having a $62,500 FMV (fair market value) in exchange for 165 shares of stock. He purchased the land three years ago for $65,000. Jay contributes machinery (Sec. 1231 property purchased four years ago) having a $115,000 adjusted basis and a $37,500 FMV in exchange for 105 shares of Ares stock. Dana contributes services worth $25,000 in exchange for 60 shares of Ares stock.

Requirements a. What is the amount of Tom's recognized gain or loss? b. What is Tom's basis in his Ares shares? When does his holding period begin? c. What is the amount of Jay's recognized gain or loss? d. What is Jay's basis in his Ares shares? When does his holding period begin? e. How much income, if any, does Dana recognize? f. What is Dana's basis in her Ares shares? When does her holding period begin? g. What is Ares's basis in the land and the machinery? When does its holding period begin? How does Ares treat the amount paid to Dana for her services