Packard Corporation Transferred Its 100 Percent Interest to State Company

Packard Corporation transferred its 100 percent interest to State Company as part of a complete liquidation of the company. In the exchange, Packard received land with a fair market value of $497,500. Packard's basis in the State stock was $687,500. The land had a basis to State Company of $635,000. What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives?

A) $137,500 loss recognized by State and a basis in the land of $497,500 to Packard.
B) $137,500 loss recognized by State and a basis in the land of $635,000 to Packard.
C) No loss recognized by State and a basis in the land of $497,500 to Packard.
D) No loss recognized by State and a basis in the land of $635,000 to Packard.