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Note: use the following fact pattern for the next five quest…

Note: use the following fact pattern for the next five questions. Assume the requirements of Sec. (§) 351 are satisfied.   Danielle, Farrah, Colin, and Earl form Magnolia Inc. (a C corporation) by transferring business assets, cash, and services as follows:   Shareholder (S/H) Transfer to Corp. FMV Basis to S/H Stock Rec’d (by S/H) Other Prop. Rec’d (by S/H) Danielle Land2 $30,000 $12,000 $40,000 (debt relief—see footnote 1) Building2, 3 $70,000 $38,000 Mortgage1 (see footnote 1) (see footnote 1) Farrah Truck2 $10,000 $15,000 $5,000 $5,000 cash Colin Cash $40,000 $40,000 $40,000 None Earl Services n/a n/a $10,000 None   1 The mortgage is $60,000 and was borrowed to help finance the purchase of the land and building. Danielle transfers the land and building to Magnolia subject to this liability.   2 These assets were held for three years prior to the formation of Magnolia.   3 Danielle originally purchased the building for $50,000, and prior to the transfer she had claimed depreciation deductions of $12,000.   As shown in the chart above, Danielle contributes land and a building in return for 40 percent of the stock. Magnolia assumes the attached $60,000 mortgage. Farrah contributes a truck in return for stock and a cash payment. Colin contributes cash for his stock. Earl receives his stock in exchange for the performance of services.   [question 1 of 5] What amount and character of gain (loss) is recognized by Danielle?