Exam 6: Corporate Liquidating Distributions

Parent Corporation owns 80% of the stock of an insolvent subsidiary corporation. Vic owns the remaining 20% of the stock. The courts determine the subsidiary to be bankrupt, and the shareholders receive nothing for their investment. How do they report their losses?

Identify which of the following statements is false.

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

Barnett Corporation owns an office building that cost $900,000. Barnett has taken $600,000 of depreciation on the building. The property is subject to a $600,000 mortgage. The office building has a current FMV of $400,000. Barnett Corporation is liquidated and the office building is distributed to a single individual shareholder who assumes the mortgage. Barnett Corporation must recognize

Riverwalk Corporation is liquidated, with Juan receiving $5,000 in money, other property having a $6,000 FMV, and a $1,000 mortgage on the property. Juan's basis in his River walk stock is $8,000. Upon liquidation, Juan must recognize a gain of

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.

Are liquidation and dissolution the same? Explain your answer.

The adjusted basis of property received in a complete liquidation is its fair market value on the distribution date.

Market Corporation owns 100% of Subsidiary Corporation's stock. Market Corporation completely liquidates Subsidiary Corporation, receiving land with a $400,000 adjusted basis and a $500,000 FMV in exchange for Subsidiary stock, which has a $300,000 adjusted basis. Market Corporation has a basis in the land of

The general rule for tax attributes of liquidating corporations is

Parent Corporation owns 100% of the stock of Subsidiary Corporation. The adjusted basis of its stock investment $100,000. A plan of liquidation is adopted. Subsidiary distributes to Parent assets with a $325,000 FMV and a $27 adjusted basis. Subsidiary also distributes liabilities in the amount of $40,000. Subsidiary has a $150,000 E&P bal 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?

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

How is the gain/loss calculated if a shareholder has acquired stock at different times and at varying prices?

Property received in a corporate liquidation by a noncorporate shareholder has

In a Sec. 332 liquidation, can a subsidiary corporation recognize losses on distributions to either the parent corporation or minority shareholders?

Parent Corporation for ten years has owned all of the stock of Subsidiary Corporation, which manufactures widgets. Parent's basis in Subsidiary's stock is $500,000. Subsidiary Corporation is insolvent and has no assets to redeem any of the stock that Parent Corporation owns when it liquidates. Nearly all of Subsidiary's gross income during the past five years has come from nonpassive activities. Parent can recognize

Under a plan of complete liquidation, Coast Corporation distributes land with a $300,000 adjusted basis and a $400,000 FMV to William, a 25% shareholder. William has a $200,000 basis in his Coast stock. The land is inventory in the hands of Coast Corporation. Coast Corporation must recognize

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

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

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?