Carol owns 60% of Blue Corp. with a basis of 80,000 while Dan owns 40%, with a basis of 70,000. Blue in turn owns two subsidiaries, S1 Corp. and S2 Corp. Blue's basis in S1 is 20,000 while Blue's basis in S2 is 40,000. S1 has the Cog business with assets with a FMV of 120,000, adjusted basis of 40,000. S2 has the Widget business with assets with a FMV of 80,000, adjusted basis of 25,000. Neither sub has liabilities and both businesses have been conducted by their company since their formation by Blue 12 years ago. The parties have come to realize that having the Cog and Widget businesses under the same corporate umbrella has been substantially detrimental to business and so they propose the following transaction: Blue will transfer 100% of the S1 stock to Carol in exchange for all of Carols Blue stock. Please describe all of the consequence to all of the parties, giving your reasons therefore. If you need to make any assumptions, please indicate what those assumptions are and why they are important.