A distribution of stock is generally taxable unless it is which of the following? 

A distribution in lieu of the option of receiving cash. 

A proportionate (i.e., pro rata) distribution. 

A distribution with respect to preferred stock. 

A distribution of convertible preferred stock. 

Which one of the following statements is true regarding the complete liquidation of a subsidiary corporation under Sec. 332? 

Gain is recognized on the liquidation only to the extent of the parent corporation’s ratable share of the subsidiary’s earnings and profits. 

The parent corporation must always recognize gain or loss on the complete liquidation of a subsidiary corporation. 

The liquidated corporation recognizes no gain or loss on the liquidation except for depreciation recapture under Sec. 1245 and Sec. 1250. 

Minority shareholders must recognize gain or loss on the complete liquidation of a subsidiary corporation. 

Pursuant to a tax-free reorganization in the current year, Sandra Peel exchanged 100 shares of Lorna Corporation stock for 100 shares of Wood Corporation stock and, in addition, received $1,000 cash, which was not in excess of Peel's ratable share of Lorna's undistributed earnings and profits. Peel paid $20,000 for the Lorna stock 18 years ago. The Wood stock had a fair market value of $24,000 on the date of the exchange and represented a 5% interest in the outstanding Wood stock. What is the recognized gain to be reported by Peel in the current year?

A. $0
B. $1,000 dividend.
C. $1,000 long-term capital gain.
D. $5,000 long-term capital gain.