In Order to Induce Prairie Corporation to Build a New

In order to induce Prairie Corporation to build a new manufacturing facility in Billings, the city donates land (fair market value of $400,000) and cash of $50,000 to the corporation.Within several months of the donation, Prairie Corporation spends $350,000 (which includes the $50,000 received from Billings) on the construction of a new plant located on the donated land.

A) Prairie must recognize income of $50,000 as to the donation.
B) Prairie will have a zero basis in the land and a basis of $50,000 in the plant.
C) Prairie must recognize income of $350,000 as to the donation.
D) Prairie will have a zero basis in the land and a basis of $300,000 in the plant.
E) None of the above.