What amount of gain does red blossom recognize

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Problem 1: Red Blossom Corporation transferred its 40 percent interest to Tea Company as part of a complete liquidation of the company. In the exchange, Red Blossom received land with a fair market value of $562,000. The corporation's basis in the Tea Company stock was $427,500. The land had a basis to Tea Company of $647,500. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives?

Option 1: No gain recognized and a basis in the land of $220,000.
Option 2: No gain recognized and a basis in the land of $647,500.
Option 3: $134,500 gain recognized and a basis in the land of $562,000.
Option 4: $134,500 gain recognized and a basis in the land of $647,500.

Reference no: EM132990503

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