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 $617,500. The corporation's basis in the Tea Company stock was $407,500. The land had a basis to Tea Company of $682,500. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives? Multiple Choice $210,000 gain recognized and a basis in the land of $682,500. $210,000 gain recognized and a basis in the land of $617,500. No gain recognized and a basis in the land of $682,500. No gain recognized and a basis in the land of $275,000.
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 $617,500. The corporation's basis in the Tea Company stock was $407,500. The land had a basis to Tea Company of $682,500. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives? Multiple Choice $210,000 gain recognized and a basis in the land of $682,500. $210,000 gain recognized and a basis in the land of $617,500. No gain recognized and a basis in the land of $682,500. No gain recognized and a basis in the land of $275,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $617,500. The corporation's basis in the Tea Company stock was $407,500. The land had a basis to Tea
Company of $682,500. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives?
Multiple Choice
$210,000 gain recognized and a basis in the land of $682,500.
$210,000 gain recognized and a basis in the land of $617,500.
No gain recognized and a basis in the land of $682,500.
No gain recognized and a basis in the land of $275,000.
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