In Comparing a Qualifying Stock Redemption with a Complete Liquidation

question 17

Multiple Choice

In comparing a qualifying stock redemption with a complete liquidation, which of the following statements is incorrect?

• A) Liquidations and qualifying stock redemptions parallel each other in terms of the effect that E & P has on the nature of the gain or loss recognized by the shareholder.
• B) The basis of property acquired is its fair market value on the date of distribution for both a qualifying stock redemption and a liquidation.
• C) Both a qualifying stock redemption and a complete liquidation produce sale or exchange treatment to the shareholder.
• D) A corporation will recognize gain upon the distribution of appreciated property for both a qualifying stock redemption and a complete liquidation, but a corporation will recognize loss upon a distribution of depreciated property only for a liquidating distribution.
• E) Section 267 disallows recognition of losses between related parties in a complete liquidation but not in a qualifying stock redemption.

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Definitions:

New-Category Entries

Products or services that introduce a new category to the market, often requiring the creation of demand and consumer education.

Planned Obsolescence

A business strategy in which the obsolescence of a product is planned and built into it from its conception, ensuring that consumers will need to purchase new products.

Ethical Issue

A situation or problem that requires individuals or organizations to choose between alternatives that must be evaluated as right or wrong, ethical or unethical.

Updated Product

A product that has been improved or modified with new features or designs to enhance its performance or appeal.