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 $500,000. the corporation's basis in the tea company stock was $300,000. the land had a basis for tea company of $600,000. what amount of gain does red blossom recognize in the exchange and what is its basis in the land it receives?

$200,000 and $500,000      

Explanation:

The computations are shown below:

For gain recognized:

= Fair market value of the received land - corporation basis

= $500,000 - $300,000

= $200,000

For land basis received by Red Blossom corporation:

= $500,000

It records only the fair market value of the land, not the land basis for tea Company so only $500,000 would be considered

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