The AB Corp. has been owned equally by individuals \(A\) and \(B\) for over five years. \(A B\) operates two qualified businesses, \(Q\) and R. The XYZ Corp. wishes to acquire Division Q, worth \(\$ 500,000\) (asset basis \(\$ 300,000\) ), and \(A B\) wants to sell. \(A B\) Corp. distributes the assets of \(Q\) to \(A\) and \(B\), who thereafter sell them to XYZ. What are the tax consequences to all parties if:

a. The distribution does qualify as a partial liquidation?

b. The distribution does not qualify under Code Sec. 302(b)(4)?