Sara and Jane form Wren Corporation. Sara transfers property, basis of $25,000 and value of $200,000, for 50 shares in Wren Corporation. Jane transfers property, basis of $10,000 and value of $185,000, and agrees to serve as manager of Wren for one year; in return, Jane receives 50 shares in Wren. The value of Jane's services to Wren is $15,000.
a. What gain or income do Sara and Jane recognize on the exchanged?
b. What is Wren Corporation's basis in the property transferred by Sara and Jane? How does Wren treat the value of the services Jane renders?