Firm NS owns 90 percent of Corporation Ts outstanding stock. NS also owns business realty that T needs for use in its business. The FMV of the realty is $4 million, and NSs adjusted basis is $5.6 million. Both NS and T are in the 21 percent tax bracket. Discuss the tax implications of each of the following courses of action, and decide which course you would recommend to NS.

a. NS could exchange the realty for newly issued shares of T stock worth $4 million.

b. NS could sell the realty to T for $4 million cash.

c. NS could lease the realty to T for its annual fair rental value of $600,000.