Norman transfers machinery that has a $75,000 basis and a $135,000 FMV to Elnor Corporation in exchange for 50 shares of Elnor stock. The machinery, purchased 4 years ago and used in Norman's business, originally cost him $150,000 (Norman has taken $75,000 in depreciation deductions prior to the exchange) and is subject to an $84,000 liability, which Elnor Corporation assumes. Kate exchanges $51,000 cash for the remaining 50 shares of Elnor stock. Required:
a. What are the amount and character of Norman’s recognized gain or loss?
b. What is Norman’s basis in his Elnor stock?
c. What is Elnor’s basis in the machinery?
d. What are the amount and character of Nancy’s recognized gain or loss?
e. What is Nancy’s basis in her Elnor stock?
f. When do Norman and Nancy’s holding periods for their stock begin?
g. Would your answers to parts (a) through (f) change if Nancy provided $97,000 of services and $5,000 in cash instead of $102,000 cash in exchange for the stock? If so, redo parts (a) through (f) to reflect this.