Calendar Year ParentCo Purchased All of the Stock of SubCo

Multiple Choice

Calendar year ParentCo purchased all of the stock of SubCo on January 1, Year 1, for $500,000. SubCo produced a loss for Year 1 of $150,000 and distributed cash of $25,000 to ParentCo. In Year 2, SubCo generated a loss of $450,000; in Year 3, it recognized net income of $90,000. What is ParentCo's capital gain or (loss) if it sells all of its SubCo stock to a nongroup member on Year 4, for $150,000?

A) $185,000
B) $150,000
C) ($35,000)
D) ($535,000)
E) All gain/loss is ordinary when subsidiary stock is sold.