1. A distribution of stock is generally taxable unless it is which of the following?
   1. A distribution in lieu of the option of receiving cash.
   2. A proportionate (i.e., pro rata) distribution.
   3. A distribution with respect to preferred stock.
   4. A distribution of convertible preferred stock.
2. Which one of the following statements is true regarding the complete liquidation of a subsidiary corporation under Sec. 332?
   1. Gain is recognized on the liquidation only to the extent of the parent corporations ratable share of the subsidiarys earnings and profits.
   2. The parent corporation must always recognize gain or loss on the complete liquidation of a subsidiary corporation.
   3. The liquidated corporation recognizes no gain or loss on the liquidation except for depreciation recapture under Sec. 1245 and Sec. 1250.
   4. Minority shareholders must recognize gain or loss on the complete liquidation of a subsidiary corporation.
3. Pursuant to a tax-free reorganization in the current year, Chi exchanged 100 shares of Mountain Corporation common stock for 100 shares of Country Corporation stock and, in addition, received $1,000 cash, which was not in excess of Chis ratable share of Mountains undistributed earnings and profits. Chi paid $20,000 for the Mountain stock 15 years ago. The Country stock had a fair market value of $24,000 on the date of the exchange and represented a 5% interest in the outstanding Country stock. What is the amount of recognized gain to be reported by Chi in the current year?
   1. $0.
   2. $1,000.
   3. $5,000.
   4. $25,000.