  Context. High redshift radio galaxies are among the most massive galaxies at
their redshift, are often found at the center of protoclusters of galaxies, and
are expected to evolve into the present day massive central cluster galaxies.
Thus they are a useful tool to explore structure formation in the young
Universe. Aims. 3C~294 is a powerful FR II type radio galaxy at z = 1.786. Past
studies have identified a clumpy structure, possibly indicative of a merging
system, as well as tentative evidence that 3C~294 hosts a dual active galactic
nucleus (AGN). Due to its proximity to a bright star, it has been subject to
various adaptive optics imaging studies. Method. In order to distinguish
between the various scenarios for 3C~294 we performed deep, high-resolution
adaptive optics near-infrared imaging and optical spectroscopy of 3C~294 with
the Large Binocular Telescope. Results. We resolve the 3C~294 system into three
distinct components separated by a few tenths of an arcsecond on our images.
One is compact, the other two are extended, and all appear to be non-stellar.
The nature of each component is unclear. The two extended components could be a
galaxy with an internal absorption feature, a galaxy merger, or two galaxies at
different redshifts. We can now uniquely associate the radio source of 3C~294
with one of the extended components. Based on our spectroscopy, we determined a
redshift of z = 1.784+-0.001, which is similar to the one previously cited. In
addition we found a previously unreported emission line at $\lambda$6749.4 \AA\
in our spectra. It is not clear that it originates from 3C~294. It could be the
Ne [IV] doublet lambda 2424/2426 AA at z = 1.783, or belong to the compact
component at a redshift of z ~ 4.56. We thus cannot unambiguously determine
whether 3C~294 hosts a dual AGN or a projected pair of AGNs.
