Parent Corporation Owns 100% of the Single Class of Stock

question 22

Multiple Choice

Parent Corporation owns 100% of the single class of stock of Subsidiary Corporation. Parent's basis in the Subsidiary stock is $500,000 when Parent completely liquidates Subsidiary Corporation within a single tax year. The Subsidiary Corporation assets have a $700,000 adjusted basis and an $800,000 FMV at liquidation. As a result of the liquidation, Parent must recognize a

• A)$0 gain.
• B)$200,000 gain.
• C)$300,000 gain.
• D)none of the above

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Definitions:

Trade Agreement

A treaty or pact between two or more nations that outlines how they will work together to ensure mutual benefits in trade.

Royalty

A payment made to the owner of certain types of property, such as patents or copyrights, for the right to use that property.

International Monetary Fund (IMF)

Organization established in 1947 to promote trade among member nations by eliminating trade barriers and fostering financial cooperation.

Developed Countries

Nations with advanced economic systems, higher standards of living, and well-established infrastructures, often characterized by high Gross Domestic Product (GDP) per capita.