Indigo corporation has a basis of $850,000 in the stock of Owl Corporation, a subsidiary in which it owns 100% of all classes of stock. Indigo purchased the stock in Owl 10 years ago. In the current year, Indigo liquidates Owl and acquires assets worth $975,000. At the time of its liquidation, Owl Corporation had a basis of $785,000 in the assets and E & P of $290,000. Which of the following statements is correct with respect to the liquidation?

	a.	Owl recognizes a gain of $190,000.
	b.	Indigo has an $785,000 basis in the assets.
	c.	Owls E & P of $290,000 is eliminated.
	d.	Indigo recognizes a gain of $125,000.