Parent Corporation owns 100% of Subsidiary Corporations single class of stock and $2 million of Subsidiary debentures. Parent purchased the debentures in small blocks from various unrelated parties at a $100,000 discount from their face amount. Parent has a $1.3 million basis in the Subsidiary stock. Subsidiary adopts a plan of liquidation whereby it distributes property having a $4 million FMV and a $2.4 million adjusted basis in redemption of the Subsidiary stock. The debentures are redeemed for Subsidiary property having a $2 million FMV and a $2.2 million adjusted basis.

a. What income or gain does Subsidiary recognize as a result of making the liquidating distributions?

b. What gain or loss does Parent recognize on the surrender of the Subsidiary stock? The Subsidiary debentures?

c. What is Parent's basis for the property received from Subsidiary?