Exam 6: Corporate Liquidating Distributions

Parent Corporation owns all of Subsidiary Corporation's stock.In addition,Parent Corporation owns $100,000 (face amount and basis)of Subsidiary Corporation's bonds.When Subsidiary Corporation is completely liquidated,it distributes property with a $70,000 adjusted basis and a $100,000 FMV to Parent Corporation in redemption of the Subsidiary Corporation bonds.Following the liquidation,Parent Corporation will have a basis in the Subsidiary Corporation property received for the bonds of

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

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 last year.Later that same year,Keke sold the pretzel maker for $300.This year,Keke adopted a plan of liquidation.Previously,Keke had never used the pretzel maker in connection with the conduct of its trade or business.The sale was reported on Keke's current tax return.What reporting option does Keke Corporation not have because of its plan of liquidation?

When a corporation liquidates,it performs three activities.What is the general order of these activities in a plan of liquidation?

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

Charlene and Dennis each own 50% of Brewster Corporation and have owned it for five years.The adjusted bases of their Brewster stock are $80,000 and $40,000 respectively.Brewster Corporation liquidates and distributes $60,000 to Charlene in exchange for her stock.It distributes a parcel of land with a $140,000 FMV which is subject to a $90,000 mortgage to Dennis in exchange for his stock.Dennis assumes the mortgage and also receives $10,000 in cash. a)What is the character and amount of each shareholder's gain or loss? b)What is each shareholder's basis in the property received in the liquidation?

Identify which of the following statements is false.

Greg,a cash method of accounting taxpayer,owns 100 shares of Parker Corporation stock with a basis of $20,000.Greg receives two liquidating distributions of $8,000 on March 3 of last year,and $8,000 on August 8 of this year.The amount of the second distribution is not known until June 15 of this year.Greg recognizes

Explain the difference in tax treatment between a partial liquidation and a complete liquidation.

Sandy,a cash method of accounting taxpayer,has a basis of $46,000 in her 500 shares of Newt Corporation stock.She receives the following distributions as part of Newt's plan of liquidation. The amount of the final distribution is not known on December 31,2007.What are the tax consequences of the distributions?

Texas Corporation is undergoing a complete liquidation and distributes land to Robert,one of its shareholders,in exchange for all of Robert's stock.The land has a basis of $300,000 and an FMV of $400,000 on Texas Corporation's books and is subject to a $325,000 liability.Robert assumes the liability on the property.Robert's basis in his Texas Corporation stock is $100,000.What is the amount of gain or loss recognized by Robert on the distribution?

Mary receives a liquidating distribution from Snell Corporation as part of a redemption of all of its stock.Mary's basis in the Snell stock is $10,000.In exchange for her stock,Mary receives property with an $8,000 basis and a $15,000 FMV that is subject to a $3,000 mortgage.Mary also receives cash of $5,000.What is Mary's recognized gain?

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

Identify which of the following statements is false.

Dusty Corporation owns 90% of Palace Corporation's stock and Susan owns the remaining stock.Dusty Corporation's stock basis is $300,000 and Susan's stock basis is $20,000.Under a plan of complete liquidation,Dusty Corporation receives property with a $400,000 adjusted basis and a $540,000 FMV and Susan receives property with a $20,000 adjusted basis and a $60,000 FMV.The bases of the properties are:

Under the general liquidation rules,Missouri Corporation is liquidated,with Jefferson receiving $5,000 in cash plus other property having a $6,000 FMV and assuming a $2,000 mortgage on the property.Jefferson's basis in his Missouri stock is $8,000.What is Jefferson's amount realized and gain or loss recognized on the liquidation?

John and June,husband and wife,have owned Ruby Corporation for a number of years.Their basis in the Ruby stock,which they own jointly,is $200,000.The Ruby stock is Sec.1244 stock.Ruby Corporation liquidates,and John and June receive the following from the corporation: accounts receivable,$30,000 FMV; a car,$21,000 FMV; office furniture,$11,000 FMV; and $25,000 in cash.What is the amount and character of their gain or loss?

Chip and Dale are each 50% owners of Tree Corporation,a holding company.They have each held their stock since the company was formed five years ago.Tree's money is invested almost entirely in stocks,bonds,rental real estate,and land.All of the stocks are traded on the New York Stock Exchange except for 1,000 shares of Conifer Corporation stock.Conifer is privately held by 50 individuals.Last year,Conifer reported about $2 million in net income.During a meeting with Chip and Dale,you discover that they plan to liquidate Tree Corporation as soon as possible to avoid the personal holding company tax.What tax issues should Chip and Dale consider with respect to this liquidation?

Ball Corporation owns 80% of Net Corporation's stock and Jack owns the remaining 20% of Net Corporation's stock.Ball's basis in the Net stock is $200,000 and Jack's basis in the Net stock is $100,000.Under a plan of complete liquidation,Ball Corporation receives property with an adjusted basis of $400,000 and an FMV of $800,000 and Jack receives property with an adjusted basis of $50,000 and an FMV of $200,000.Ball and Jack's bases in the property received are:

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?