Parent Corporation Owns 100% of the Single Class of Stock

question 22

Multiple Choice

Parent Corporation owns 100% of the single class of stock of Subsidiary Corporation. Parent's basis in the Subsidiary stock is $500,000 when Parent completely liquidates Subsidiary Corporation within a single tax year. The Subsidiary Corporation assets have a $700,000 adjusted basis and an $800,000 FMV at liquidation. As a result of the liquidation, Parent must recognize a

• A)$0 gain.
• B)$200,000 gain.
• C)$300,000 gain.
• D)none of the above

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Definitions:

Hearsay Rule

A legal principle that excludes the use of secondhand testimony in court because it is not made under oath or subject to cross-examination.

Spousal Privilege

A legal right that protects spouses from being forced to testify against each other in court.

Present Sense Impression

A legal term referring to an exception to the hearsay rule, allowing a statement describing or explaining an event or condition made while the declarant was perceiving the event or condition, or immediately thereafter, to be admissible as evidence.

Excited Utterance

A statement made spontaneously and without reflection in the excitement of the moment, considered an exception to the hearsay rule in legal proceedings.