In a "C" reorganization, Target Corporation transferred all of its assets except land to Acquiring Corporation.The land was worth $600,000 (basis $520,000).The transferred assets were worth $20 million and had a basis of $16 million in the hands of Target.In exchange, Target received stock of Acquiring worth $19.4 million, cash of $200,000, and an office building worth $400,000 (basis to Acquiring was $260,000).Target liquidates, subject to the rules of § 361.How much gain must Target recognize?

Question

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The gain recognized by Target in a "C" reorganization is generally calculated as the excess of the fair market value of the assets received over Target's adjusted basis in the assets transferred. In this case, Target transferred assets worth $20 million with a basis of $16 million, resulting in a gain of $4 million, which is recognized by Target upon liquidation. However, the land is excluded from this calculation since it was not transferred to Acquiring Corporation. Therefore, Target must recognize a gain of $80,000 on the land, which is the excess of the fair market value of $600,000 over its adjusted basis of $520,000. There is no gain to recognize on the office building or the assets received in exchange for the transferred assets.

In a "C" Reorganization, Target Corporation Transferred All of Its