Penguin Corporation Purchased Bonds (Basis of $190,000) of Its 100

Multiple Choice

Penguin Corporation purchased bonds (basis of $190,000) of its 100% owned subsidiary, Finch Corporation, at a discount. Pursuant to a § 332 liquidation and in satisfaction of the indebtedness, Finch distributes land worth $200,000 (basis of $160,000) to Penguin. Which of the following statements is correct with respect to the distribution of land?

A) Neither Finch nor Penguin recognize gain (or loss) .
B) Finch recognizes no gain and Penguin recognizes a gain of $10,000.
C) Finch recognizes a gain of $40,000 and Penguin recognizes no gain.
D) Finch recognizes a gain of $40,000 and Penguin recognizes a gain of $10,000.
E) None of the above.