Cardinal Corporation Has a Basis of $800,000 in the Stock

question 11

Essay

Cardinal Corporation has a basis of $800,000 in the stock of Finch Corporation,a subsidiary in which it owns 90% of all classes of stock.Cardinal has maintained this ownership interest for more than four years.In the current year,Cardinal liquidates Finch Corporation and acquires assets worth $1,300,000 and with an adjusted basis to Finch of $750,000.At the time of liquidation,Finch had E & P of $400,000,and a short-term capital loss carryover of $25,000.
a.What is the recognized gain or loss to Finch and to Cardinal as a result of Finch's liquidation?
b.What basis will Cardinal Corporation have in the assets acquired from Finch Corporation?
c.What happens to Finch's E & P and short-term capital loss carryover?

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Definitions:

Ambulating

The act of walking or moving from one place to another, often used in healthcare to refer to patients' mobility status.

Incontinent

The inability to control bodily functions such as urination or defecation, often requiring management strategies or medical treatment.

Enuresis

The medical term for involuntary urination, especially by children at night, commonly known as bedwetting.

Perineal Care

The practice of maintaining cleanliness around the genital and anal areas to prevent infection and provide comfort, especially important for those with certain health conditions or limitations.