Ben and Pete form a corporation to run a real estate investment management company. Ben contributes cash of $40,000 to the corporation in exchange for 50% of its stock. Pete obtains his 50% ownership interest by contributing land with a fair market value of $40,000 and a basis of $60,000. The land has the potential to be more valu- able to the business in the future. Ben is aware of the nonrecognition rules for contri- butions to corporations and wants to use the corporate form. Pete realizes that if he contributes the land, he will not be able to recognize the unrealized loss.