Skylark Corporation Owns 90% of the Outstanding Stock of Quail

Multiple Choice

Skylark Corporation owns 90% of the outstanding stock of Quail Corporation,having purchased the stock five years ago for $550,000.Pursuant to a plan of liquidation adopted by Quail Corporation on March 4,2010,Quail distributes all its property on December 1,2010,to its shareholders.Quail Corporation had never been insolvent and had E & P of $830,000 on the date of liquidation.Pursuant to the liquidation,Quail distributed property worth $690,000 (basis $580,000) to Skylark Corporation.How much gain must the parties recognize in 2010 on the transfer of this property to Skylark Corporation?

A) $140,000 as to Skylark and $110,000 as to Quail.
B) $0 as to Skylark and $110,000 as to Quail.
C) $140,000 as to Skylark and $0 as to Quail.
D) $30,000 as to Skylark and $110,000 as to Quail.
E) None of the above.