LO$.4$ Red Corporation wants to set up a manufacturing facility in a midwestern state.

After considerable negotiations with a small town in Ohio, Red accepts the following

offer of land with a fair market value of $$3,000,000$ and cash of $$1,000,000.$

a$.$ How much income, if any, must Red Corporation recognize?

b$.$ What basis will Red Corporation have in the land?

c$.$ Assume that in addition to the facts given, the small town offers to reduce the

established property tax rate by $40\%$ on new assets acquired by Red during

the two$-$year period after locating in the town. What are the Federal income

tax consequences of the property tax abatement?