Exam 6: Corporate Liquidating Distributions

New York Corporation adopts a plan of liquidation on March 15 and shortly thereafter sells a parcel of land on which it realizes a $15,000 gain (excluding the effects of a $2,000 sales commission). New York pays its legal counsel $500 to draft the plan of liquidation. All of New York's remaining properties are distributed to its shareholders on September 15. What are the tax consequences to New York on the land sale?

Identify which of the following statements is false.

Moya Corporation adopted a plan of liquidation last year. All but a nominal amount of Moya's assets are distributed to its shareholders within the year. Which of the following statements is not true?

Santa Fe Corporation adopts a plan of liquidation late in the current tax year in which it expects to earn $100,000 profits from its operating activities. Santa Fe's operating activities are discontinued before the end of the year. Pursuant to the liquidation, it distributes assets, which result in the recognition of $30,000 of ordinary losses. Santa Fe also distributes assets that have appreciated in value, which results in the recognition of $30,000 of ordinary gains. Generally, Santa Fe Corporation should distribute

Key Corporation distributes a patent with an indeterminable value to Gary as part of a plan of complete liquidation. In addition, Gary receives $40,000 cash and land with a $70,000 FMV and a $30,000 adjusted basis. Gary's basis in the Key stock (a capital asset) surrendered is $120,000. If Gary relies on the open transaction doctrine, at the liquidation date he must recognize a

Last year, Toby made a capital contribution of a pretzel maker having a $2,000 adjusted basis and a $200 FMV to Keke Corporation in exchange for additional stock. This year, Keke Corporation adopted a plan of liquidation. Prior to the adoption of the liquidation plan, Keke had not used the pretzel maker in connection with the conduct of its trade or business. Which of the following statements is true?

The liquidation of a subsidiary corporation must be completed within one tax year to receive nonrecognition treatment.

What basis do both the parent and minority shareholders take in the assets received in a Sec. 332 liquidation?

What attributes of a controlled subsidiary corporation are carried over to the parent when the subsidiary is liquidated?

Robot Corporation is liquidated, with Marty receiving property having an adjusted basis of $60,000 and an FMV of $90,000. The property is subject to an $80,000 mortgage, which Marty assumes. Marty's basis in the Robot stock surrendered is $50,000. Marty must recognize

Liquidation rules generally are applied the same to the following organizations except for

In general, a noncorporate shareholder that receives a distribution in complete liquidation of the liquidating corporation recognizes his or her entire realized gain as a capital gain.

Identify which of the following statements is true.

If a liquidating subsidiary corporation primarily has loss property to distribute, the parent corporation should

A liquidation must be reported to the Internal Revenue Service on Form 966

Lake City Corporation owns all of the stock in Columbia Corporation. Pursuant to a plan of complete liquidation, Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City. Lake City's basis in the land will be

Under what circumstances does a liquidating corporation not recognize a gain or loss when making a distribution?

For the following set of facts, what are the tax consequences to Parent Corporation, Subsidiary Corporation, and a Subsidiary Corporation shareholder, Melisa? Parent Corporation owns 80% of Subsidiary Corporation's stock. Melisa owns the remaining 20% of the Subsidiary stock. Parent and Melisa's stock have adjusted bases of $100,000 and $25,000, respectively, for their Subsidiary stock. Subsidiary distributes land having a $125,000 adjusted basis and a $200,000 FMV to Parent and $50,000 in cash to Melisa.

A subsidiary must recognize depreciation recapture income when the subsidiary is liquidated into the parent.

When a subsidiary corporation is liquidated into its parent corporation under a formal plan of liquidation, the distributions must take place within