Skylark Corporation Owns 100% of the Outstanding Stock of Quail

Skylark Corporation owns 100% of the outstanding stock of Quail Corporation,having purchased the stock 5 years ago for $310,000.Pursuant to a plan of liquidation adopted by Quail Corporation on March 4,2008,Quail distributes all its property on December 1,2008,to its shareholder.Quail Corporation had never been insolvent and had E & P of $420,000 on the date of liquidation.Pursuant to the liquidation,Quail distributed property worth $390,000 (basis $325,000) to Skylark Corporation.How much gain must the parties recognize in 2008 on the transfer of this property to Skylark Corporation?

A) $0 as to both Skylark Corporation and Quail Corporation.
B) $80,000 as to Skylark Corporation.
C) $65,000 as to Quail Corporation.
D) $15,000 as to Skylark Corporation.
E) None of the above.