Parent Corporation Owns All of Subsidiary Corporation's Stock

question 65

Multiple Choice

Parent Corporation owns all of Subsidiary Corporation's stock. In addition, Parent Corporation owns $100,000 (face amount and basis) of Subsidiary Corporation's bonds. When Subsidiary Corporation is completely liquidated, it distributes property with a $70,000 adjusted basis and a $100,000 FMV to Parent Corporation in redemption of the Subsidiary Corporation bonds. Following the liquidation, Parent Corporation will have a basis in the Subsidiary Corporation property received for the bonds of

• A)$0.
• B)$70,000.
• C)$100,000.
• D)none of the above

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Definitions:

Bond Indenture

A legal contract between a bond issuer and bondholders specifying the terms of the bond, such as the maturity date, rate of interest, and collateral, if any.

Market Rate

The prevailing interest rate available in the marketplace for instruments of similar risk and maturity.

Administrative Costs

Expenses related to the general operation of an organization, including salaries of non-sales personnel, rent, utilities, and supplies.

Tradable Pollution Rights

Environmental policy tool allowing companies or entities to buy, sell, and trade emissions allowances, aiming to control and reduce overall pollution in a cost-effective manner.