What was the character of that gain

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Fran owned an equipment rental business in her sole name for four years. After her business advisors suggested that she conduct her equipment rental activity in corporate form, she promply transferred the equipment to Rental Corporation, a newly formed corporation. Fran received all of the stock of Rental Corporation in exchange for the equipment. At the time of the transfer of the equipment to Rental Corporation, Fran's adjusted basis in the equipment was $50,000, the fair market value was $150,000, the equipment was subject to a security agreement and note assumed by the corporation of $70,000, and there was depreciation recapture potential of $12,000. Fran received stock of Rental Corporation worth $80,000. As a result of the transaction, how much gain did Fran recognize, what was the character of that gain and what is the corporation's basis in the equipment.

Reference no: EM13137350

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