S Co. is owned 90% by its parent P co., 5% by C and 5% by D. S Co . is completely liquidated pursuant to Code 332 as a parent/subsidiary liquidation. S Co. distributes its assets as follows:

TO	SHAREHOLDER'S S CO. STOCK BASIS	AMOUNT
P Co.	$9,000	Inventory:	FMV	$90,000
			BASIS	$70,000
C	$1,000	Capital Asset:	FMV	$5,000
			BASIS	$2,000
D	$6,000	Capital Asset	FMV	$5,000
			BASIS	$7,000

S Co.'s recognized gain or loss on the distribution to P Co. is

$20,000 ordinary income

0

$20,000 capital gain

None of these.

S Co.'s recognized gain or loss on the distribution to C is

$3,000 capital gain

0

None of these.

$4,000 capital gain

S Co.'s recognized gain or loss on the distribution to D is

$2,000 capital gain

None of these.

<$2,000> capital loss

0