Stock in a controlled subsidiary corporation can be distributed tax-free to the distributing corporation's shareholders under Sec. 355. Explain the difference between such a distribution and a divisive Type D reorganization.

A. The difference relates to an asset transfer and plan of reorganization. In a nondivisive Sec. 355 distribution, stock of an existing controlled corporation (subsidiary) can be distributed tax-free even if none of the distributing corporation's assets are transferred to the controlled corporation in a related transaction. To qualify as a divisive Type D reorganization, only the stock distribution must occur as part of an integrated transaction governed by a plan of reorganization in accordance with Sec. 368.

B. The difference relates only to an asset transfer. In a nondivisive Sec. 355 distribution, assets of an existing controlled corporation (subsidiary) can be transferred tax free even if none of the transferring corporation's assets are transferred to the controlled corporation in a related transaction. To qualify as a divisive Type D reorganization, the asset transfer must occur as part of an integrated transaction governed by a plan of reorganization in accordance with Sec. 368.

C. The difference relates to a plan of reorganization. In a nondivisive Sec. 355 distribution, stock of an existing controlled corporation (subsidiary) can be distributed tax free even if none of the distributing corporation's stock is transferred to the controlled corporation in a related transaction. To qualify as a divisive Type D reorganization, the stock distribution must occur as part of an integrated transaction governed by a plan of reorganization in accordance with Sec. 368.

D. The difference relates to an asset transfer and plan of reorganization. In a nondivisive Sec. 355 distribution, stock of an existing controlled corporation (subsidiary) can be distributed tax free even if none of the distributing corporation's assets are transferred to the controlled corporation in a related transaction. To qualify as a divisive Type D reorganization, the asset transfer and stock distribution must occur as part of an integrated transaction governed by a plan of reorganization in accordance with Sec. 368.