Red Blossom Corporation Transferred Its 40 Percent Interest to Tea

Multiple Choice

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 to 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?

A) $200,000 gain recognized and a basis in the land of $600,000
B) $200,000 gain recognized and a basis in the land of $500,000
C) No gain recognized and a basis in the land of $600,000
D) No gain recognized and a basis in the land of $300,000