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Tan Corporation desires to set up a manufacturing facility in the western part of the United States. After considerable negotiations with Butte,...

Tan Corporation desires to set up a manufacturing facility in the western part of the United States. After considerable negotiations with Butte, Montana, Tan accepts the following offer: land (fair market value of $4.5 million) and cash of $1.5 million. a. What amount, if any, of gain or ordinary income does Tan recognize? b. What basis does Tan have in the land? c. Within one year of the contribution, Tan purchases equipment for $1.6 million. What basis will Tan have in the equipment?

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