Q. Can I use Rare Candy to place a Stage 2 onto a Basic Pokémon?
A. You can use Rare Candy to evolve a Basic Pokémon into a Stage 1 or Stage 2. This essentially counts as your "Evolution" for that Pokémon that turn, although it's not restricted by the first turn the Pokémon is in play. The Stage 1 reference is because the card works on the turn the Basic is played. (Sep 11, 2003 PUI Rules Team; Jul 22, 2004 PUI Rules Team)
Q. Can I use Rare Candy to evolve a Baby Pokémon into its next stage? What about the newer forms of babies that are considered "Basic Pokémon" but have the "Baby Evolution" Poké-POWER?
A. Rare Candy states if you have a card that "Evolves From" your Pokémon There are currently no cards with text saying "evolves from" its baby form, so Rare Candy will not work on any form of baby Pokémon (Oct 23, 2003 PUI Rules Team)
Q. Can I use Rare Candy to evolve Pichu into Raichu EX?
A. No, Rare Candy states if you have a card that "Evolves From" your Pokémon Pikachu does not say that it "Evolves From" Pichu, so Rare Candy will not work in this situation. (Sep 11, 2003 PUI Rules Team)
^ Applies for all basic pokemon with the "Baby Evolution" power. They Cannot be Candied.