Parent Corporation Owns 100% of the Stock of Subsidiary Corporation

question 96

Essay

Parent Corporation owns 100% of the stock of Subsidiary Corporation. The adjusted basis of its stock investment
$100,000. A plan of liquidation is adopted. Subsidiary distributes to Parent assets with a $325,000 FMV and a $27 adjusted basis. Subsidiary also distributes liabilities in the amount of $40,000. Subsidiary has a $150,000 E&P bal
a) What is the amount and character of Subsidiary Corporation's recognized gain or loss on the distribution?
b) What is the amount and character of Parent Corporation's recognized gain or loss on the redemption of the Subsidiary stock?
c) What basis does Parent take in the assets?
d) What happens to parent Corporation's basis in the Subsidiary stock and to Subsidiary's tax attributes?

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Definitions:

Revised Secularization Thesis

An updated version of the secularization theory that suggests while religious institutions may lose social significance, personal spirituality or belief may not necessarily decline.

Sacred and Profane

Refer to categories within sociology that distinguish between the holy, spiritual, or religious (sacred) and the secular, everyday, or non-religious (profane).

Émile Durkheim

A French sociologist, one of the founding figures of sociology, known for his studies on social solidarity, religion, and the division of labor in society.

Stanley Cup

The championship trophy awarded annually to the National Hockey League (NHL) playoff winner.