What basis will Red Corporation have in the land

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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.

Required -

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

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

c. Assume that in addition to the facts given, the small town offers to reduce the established property tax rate by 40% on new assets acquired by Red during the two-year period after locating in the town. What are the Federal income tax consequences of the property tax abatement?

Reference no: EM132631078

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