Smith owns 85 percent of Smith Sisters Company. On March 8 of the current year she contributed land to the firm. Her adjusted basis in the land was $60,000 and its fair market value on March 8 was $140,000. Smith did not receive anything in return for the contribution. As a result of this transaction, Smith Sisters Company will:

1. recognize a gain of $80,000 and will take a basis in the land of $80,000
2. recognize a gain of $140,000 and will take a basis in the land of $140,000
3. not recognize a gain and will take a basis in the land of $60,000
4. not recognize a gain and will take a basis in the land of $140,000