Skylark Corporation Owned 100% of the Outstanding Stock of Quail

Multiple Choice

Skylark Corporation owned 100% of the outstanding stock of Quail Corporation, having purchased the stock six years ago for $200,000. Pursuant to a plan of liquidation adopted by Quail Corporation earlier in the current year, Quail distributed all its property to its shareholder. Quail Corporation had never been insolvent and had E & P of $700,000 on the date of liquidation. Pursuant to the liquidation, Quail distributes property worth $650,000 (basis $340,000) to Skylark Corporation. How much gain must the parties recognize on the transfer of this property to Skylark Corporation?

A) $0 as to both Skylark Corporation and Quail Corporation.
B) $140,000 as to Skylark Corporation.
C) $310,000 as to Quail Corporation.
D) $450,000 as to Skylark Corporation.
E) None of the above.