Which of the following statements is correct with respect to a partial liquidation? The genuine contraction of a corporate business requirement is an objective test that taxpayers can rely upon with certainty. The distribution of proceeds from the sale of excess inventory to shareholders in exchange for part of their stock will not satisfy the not essentially equivalent to a dividend test. A stock redemption pursuant to a partial liquidation cannot be pro rata with respect to the shareholders. The termination of a business test requires that the distributing corporation actively conducted at least three trades or businesses for at least five years. None of the above.

Which of the following actions would be most likely to reduce potential conflicts of interest between stockholders and managers? a. change the corporation's formal documents to make it easier for outside investors to acquire a controlling interest in the firm through a hostile takeover. b. eliminate a requirement that members of the board of directors must hold a high percentage of their personal wealth in the firm's stock. c. for a firm that compensates managers with stock options, reduce the time before options are vested, i.e., the time before options can be exercised and the shares that are received can be sold. d. pay managers large cash salaries and give them no stock options. e. beef up the restrictive covenants in the firm's debt agreements.