1. Three owners join together to form ABC, INC., which properly elects to be taxed as a C corporation. Shareholder A contributes cash of $10,000 and a collection of jewelry display cases to be placed in the jewelry store operated by the C corporation. The jewelry display cases have a basis in As hands of $112,000, and a fair market value of $81,000. B contributes $10,000 in cash and jewelry inventory having a basis in Bs hands of $35,000 and a fair market value of $81,000. C contributes inventory having a basis in Cs hands of $120,000 and a fair market value of $96,000. Since each of the three of them have agreed to be equal shareholders, it was determined that it was fair to distributed $5,000 in cash to Shareholder C because her initial contribution had a fair market value of $5,000 more than the contribution of either A or B.

1. (5 Points). What gain or loss is recognized by ABC, Inc., as a result of the contribution transactions by its three initial shareholders?