Cannon and Bruno form Lemon Corporation. Cannon transfers property (basis of $365,000 and fair market value of $300,000) while Bruno transfers land (basis of $80,000 and fair market value of $290,000) and $10,000 in cash. Each receives 50% of Lemon Corporation’s stock, which is worth a total of $600,000. As a result of these transfers:
(Give an explanation for your answer)
a. Cannon has a recognized loss of $65,000, and Bruno has a recognized gain of $210,000.
b. Neither Cannon nor Bruno has any recognized gain or loss.
c. Cannon has no recognized loss, but Bruno has a recognized gain of $210,000.
d. Lemon Corporation will have a basis in the land of $290,000.
e. None of the above.