Identify Which of the Following Statements Is True

question 28

Multiple Choice

Identify which of the following statements is true.

• A)A parent corporation cannot liquidate a subsidiary corporation (having but a single class of stock)and avoid recognizing its realized gain unless the parent corporation owns at least 80% of the subsidiary's stock.
• B)The liquidation of a subsidiary corporation must be completed within one tax year to receive nonrecognition treatment.
• C)The provisions permitting a tax-free liquidation of a subsidiary corporation apply to both corporate and noncorporate shareholders of the subsidiary.
• D)All of the above are false.

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Definitions:

Investment Component

A part of economic activity related to spending on goods and services not for immediate consumption but for future benefit.

Government Purchases Component

The part of gross domestic product (GDP) that includes spending by all levels of government on goods and services.

Social Security Benefits

Government payments made to eligible individuals, such as retirees or disabled workers, as part of a social insurance program.

Investment Component

The portion of GDP or economic output that is attributed to investment in physical assets, like buildings, equipment, and inventory.