43)

M and N were unrelated corporations that for many years were engaged in the furniture sales business. A division of M also was in the business of selling antiques. Pursuant to a plan, M sold off the antique division in a taxable sale (constituting 50 percent of its total historic business assets) to an unrelated third party. Next, M transferred all of its assets, including the cash proceeds from the sale, to N solely for N's voting stock and the assumption of M's liabilities. Finally, M liquidated. M and N report the transaction as a C reorganization. They are?

	a.	Correct, as the transaction was not divisive and the sale of the antique division was to an unrelated party with the M shareholders retaining no interest in those assets.
	b.	None of these or more than one of these.
	c.	Incorrect, but the transaction may qualify as an A reorganization.
	d.	Incorrect, as less than 70% of the gross assets and 90% of the net assets of M were transferred to N.
	e.	Incorrect, as the continuity of business enterprise test is not satisfied.