Calendar Year ParentCo Purchased All of the Stock of SubCo

question 25

Multiple Choice

Calendar year ParentCo purchased all of the stock of SubCo on January 1, Year 1, for $500,000. SubCo produced a loss for Year 1 of $150,000 and distributed cash of $25,000 to ParentCo. In Year 2, SubCo generated a loss of $450,000; in Year 3, it recognized net income of $90,000. What is ParentCo's capital gain or (loss) if it sells all of its SubCo stock to a nongroup member on Year 4, for $150,000?

• A)$185,000
• B)$150,000
• C)($35,000)
• D)($535,000)
• E)All gain/loss is ordinary when subsidiary stock is sold.

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Definitions:

Canadians

Citizens of Canada, a country located in the northern part of North America, known for its multicultural society and bilingual linguistic policies.

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