This year, John, Meg, and Karen form Frost Corporation. John contributes land purchased as an investment four years ago for $15,000 that has a $30,000 FMV in exchange for 30 shares of Frost stock. Meg contributes machinery (Sec. 1231 property) purchased four years ago and used in her business having a $35,000 adjusted basis and a $30,000 FMV in exchange for 30 shares of Frost stock. Meg had purchased the machinery 4 years ago; $10,000 of depreciation has been claimed by Meg prior to the exchange. Karen contributes services worth $20,000 in exchange for 20 shares of Frost stock. A) What is the amount of John's recognized gain or loss? B) What is John's basis in his Frost shares? When does his holding period begin?
C) What is the amount of Meg's recognized gain or loss?
D) What is Meg's basis in her Frost shares? When does her holding period begin?
E) How much income, if any, must Karen recognize?
F) What is Karen's basis in her Frost shares? When does her holding period begin?
G) What is Frost Corporation's basis in the land and the machinery? When does its holding period begin? How does Frost Corporation treat the amount paid to Karen for her services?

Onsider the following subscription behavior information from genie, a web site that provides tools for constructing a family tree (ancestor search). subscriptions cost $9.99 per month, but you are charged for the entire year at the time of purchase. there is a one-year minimum term when you sign up for the service. once purchased, subscriptions are set to renew automatically unless the subscriber cancels them. when a membership renews, it renews for a one-year term and again you are charged for the entire year. there are no variable costs associated with providing this service to an individual customer, but genie does engage in customer relationship activities that they believe will increase customer retention. these customer relationship activities cost genie about $10 per year per customer. based on a sample of 1000 customers that joined genie five years ago, near the time when the company was founded, they were able to determine how many of those customers remained subscribers in the second year, third year etc. based on this information, genie calculated the average annual retention rate to be 20%. genie uses an annual discount rate of 8%. a. last year, genie spent $10,000 placing advertisements on google. genie management believes that these advertisements were responsible for about 300 new subscribers. would you recommend to genie management that they purchase more google ads? b. suppose a newly-introduced loyalty program increases the number of customers that remained to 30%. does this new data change your answer to 9.a? c. do you have any hesitations or concerns about making recommendations to management based on your above estimate of customer lifetime value?