How much gain or income must red corporation recognize

Assignment Help Accounting Basics

Reference no: EM131970420

Problem

Red Corporation wants to set up a manufacturing facility in a Midwestern state. After considerable negotiations with a small town in Ohio, Red accepts the following offer: land (fair market value of $3 million) and cash of $1 million.

a. How much gain or income, if any, must Red Corporation recognize?

b. What basis will Red Corporation have in the land?

c. Within one year of the contribution, Red constructs a building for $800,000 and purchases inventory for $200,000. What basis will Red Corporation have in each of those assets?

Reference no: EM131970420

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