Red Blossom Corporation transferred its 40 percent interest to Tea Company as part of a complete liquidation of the company

Accounting Jan 16, 2021

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 $619,500. The corporation's basis in the Tea Company stock was $535,000. The land had a basis to Tea Company of $640,000. What amount of gain does Red Blossom recognize in the exchange and what is its basis in the land it receives?

Multiple Choice

$84,500 gain recognized and a basis in the land of $640,000.
$84,500 gain recognized and a basis in the land of $619,500.
No gain recognized and a basis in the land of $640,000.
No gain recognized and a basis in the land of $105,000.

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