Several years ago, your client, Brooks Robinson, started an office cleaning service. His business was very successful, owing much to his legacy as the greatest defensive third baseman in major league history and his nickname, The Human Vacuum Cleaner. Brooks operated his business as a sole proprietorship and used the cash method of accounting. Brooks was advised by his attorney that it is too risky to operate his business as a sole proprietorship and that he should incorporate to limit his liability. Brooks has come to you for advice on the tax implications of incorporation. His balance sheet is presented below. Under the terms of the incorporation, Brooks would transfer the assets to the corporation in return for 100 percent of the companys common stock. The corporation would also assume the companys liabilities (payables and mortgage).

How much, if any, gain or loss (on a per asset basis) will Brooks recognize if he had taken back a 10-year note worth $79,000 plus stock worth $93,000 plus the liability assumption?

Balance Sheet
		Adjusted Basis			FMV
Assets
Accounts receivable	$	0		$	23,000
Cleaning equipment (net)		43,000			38,000
Building		86,000			93,000
Land		43,000			68,000
Total assets	$	172,000		$	222,000
Liabilities
Accounts payable	$	0		$	28,000
Salaries payable		0			23,000
Mortgage on land and building		53,000			53,000
Total liabilities	$	53,000		$	104,000