1. 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 Pearl's 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 #1 above. Will Pearl Corp. recognize any gain as a result of the liquidation?

a. yes.

b. no.

Refer to question #1 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.