Nikeya sells land (adjusted basis of 120,000) to her adult son, Shamed, for its appraised value of95,000. Which of the following statements is correct?
1) Nikeya will recognize a loss of $25,000 on the sale.
2) Nikeya will recognize a gain of $25,000 on the sale.
3) Nikeya will not recognize any gain or loss on the sale.
4) The sale is not allowed because the sale price is less than the adjusted basis.