Parent Corporation Owns 100% of the Stock of Subsidiary Corporation

question 30

Essay

Parent Corporation owns 100% of the stock of Subsidiary Corporation. The adjusted basis of its stock investment is $100,000. A plan of liquidation is adopted. Subsidiary distributes to Parent assets with a $325,000 FMV and a $275,000 adjusted basis. Subsidiary also distributes liabilities in the amount of $40,000. Subsidiary has a $150,000 E&P balance.
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?

---

Definitions:

Dream Content

The themes, narratives, images, and emotions that make up a dream, often subject to interpretation in terms of underlying psychology.

REM Rebound

The phenomenon where a person experiences increased REM sleep after being deprived of REM sleep for a period.

Narcolepsy

A chronic sleep disorder characterized by overwhelming daytime drowsiness and sudden attacks of sleep, often associated with cataplexy and other REM sleep disturbances.

Psychologically Meaningless

Refers to information or stimuli that hold no significant value or relevance to one's mental processes or emotional state.