(2) Xco is an accrual basis taxpayer with multiple lines of businesses. One business is a gas station. The land underneath the gas station did not appear contaminated when Xco purchased it. However, the land now has potential soil and groundwater problems (environmental liabilities). Xco engaged in a section 351 tax free exchange transferring the gas station to a new subsidiary Sco in exchange for the stock of Sco and the assumption of the environmental liabilities. Before the transfer, Xco did not take any environmental remediation efforts to clean up the lands soil and groundwater problems. How is the basis of Xcos land determined?

(4) Alex Curtis, during the audit of Landon Company, has determined that the company will be preparing its financial statements on a liquidation basis of accounting due to the fact that management has decided to liquidate Landon Company at the end of the first quarter of next year. You have determined that this basis of accounting is not GAAP. As a result, Alex seeks your assistance to determine if Alex can issue an unmodified/unqualified audit report.