Shareholder A contributes property (Basis ,000, FMV 0,000) to a newly formed C Corporation for 60% of the stock. Shareholder B contributes services (FMV ,000) for 40% of the stock. What is Shareholder A's recognized gain?

For a tax-free exchange under §351, transferors of property must own at least 80% of the corporation immediately after the exchange. Since B contributed only services, B is not a transferor of property. A owns only 60%, so the 80% test is not met. The transaction is fully taxable.