Two years ago, Connor Inc. announced its intention to construct a manufacturing facility in the Shenandoah Valley. In order to persuade Connor to locate the facility in Augusta County, the county government contributed a six-acre tract of undeveloped county land to the corporation. The appraised FMV of the land at date of contribution was $280,000. Soon after accepting the contribution, Connor paid $3,300 to an attorney to do a title search to make sure that it had uncontested ownership of the land. Connor also paid $12,900 for a survey and site map of the six acres and $1,360 for two water wells drilled on the land. Did Connor recognize income because of the receipt of the land? What is the proper tax treatment of Connor’s $17,560 expenditure with respect to the land? This year, Connor’s attorney discovered that the Estate of Elsa Reynolds claimed title to the six acres and was preparing to file suit in Virginia state court to regain ownership and possession. The attorney advised Connor that the estate’s claim appeared valid and would be upheld. Consequently, Connor informed Augusta County that it was renouncing all claim to the land and would build its new manufacturing facility 200 miles away in Rockingham County. Did Connor recognize a loss when it renounced its claim to the land?