IRC 302(b)(2) states that a redemption will be treated as an exchange if the redemption is a disproportionate distribution The determination of whether a redemption qualifies under this provision is: a. very subjective. b. very objective. Stone Corp. purchased 100% of the stock of Pearl Corp. in 1984 for $300,000. Early this year, Pearl was liquidated. Stone Corp. received all of Pearls assets, which had a basis to Pearl Corp. of $420,000 and a FMV of $440,000. Assume the requirements of 332 were satisfied. Will Stone Corp. recognize any gain as a result of the liquidation? a. yes. b. no. Refer to question #11 above. Will Pearl Corp. recognize any gain as a result of the liquidation? a. yes. b. no. Refer to question #11 above. The gain potential in the stock owned by Stone Corporation prior to the liquidation is: a. deferred until a later time. b. eliminated, i.e., will never be recognized.