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 $635,000. the corporation's basis in the tea company stock was $312,500. the land had a basis to tea company of $802,500. what amount of gain does red blossom recognize in the exchange and what is its basis in the land it receives?

The amount of gain that Red Blossom recognize in the exchange is $322500 and its basis in the land it receives is $635000.

Explanation:

Red Blossom recognize the gain

= Fair market value of land – corporation basis

= $635000 - $312500

= $322500

Basis of Land = Fair market value  

                       = $635000

$322500 gain recognized and a basis in the land of $635000

Therefore, The amount of gain that Red Blossom recognize in the exchange is $322500 and its basis in the land it receives is $635000.