Exam 6: Corporate Liquidating Distributions

Liquidation and dissolution have the same legal meaning.

In a Sec.332 liquidation,what bases do both the parent and minority shareholders take in the assets received?

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

A corporation is required to file Form 966 within 30 days after the adoption of a plan of liquidation.

Identify which of the following statements is true.

A subsidiary recognizes no gain or loss on a distribution to a parent corporation owning more the majority of the subsidiary's stock in a complete liquidation.

Specialty Corporation distributes land to one of its shareholders,Sam,as part of a plan of liquidation.The land,which was used in Specialty's business,has an adjusted basis of $50,000 and an FMV of $130,000 on the date of distribution.Sam's basis in Specialty Corporation stock is $100,000.What is the amount and character of the gain/loss recognized by Specialty Corporation? What is the amount and character of the gain/loss recognized by Sam?

Identify which of the following statements is false.

Parent Corporation owns 70% of Sam Corporation's single class of stock.This year,Parent Corporation purchases for cash the remaining 30% of Sam Corporation's stock from four individual investors pursuant to a tender offer.A plan of liquidation is approved by Sam Corporation's shareholders during the last month of this year,and Sam Corporation's assets are distributed by year-end to Parent Corporation in exchange for all of Sam's outstanding stock.Parent Corporation should

Property received in a corporate liquidation by a noncorporate shareholder has

Generally,a corporation recognizes a gain,but not a loss,on a liquidating distribution.

Why should a corporation that is 100% owned by another corporation be treated differently when it liquidates than a corporation that is 100% owned by an individual?

Under Illinois Corporation's plan of liquidation,the corporation distributes land to one of its shareholders,Springer.The land,which is used in Illinois trade or business,has a $20,000 adjusted basis and a $60,000 FMV on the distribution date.What are the tax consequences of this distribution to Illinois and Springer?

A plan of liquidation

Bluebird Corporation owns and operates busses and has decided to liquidate its operations.Victor,who owns 80% of the company's stock,will receive all of the busses,repair parts inventory,and all tools and equipment.He plans to start a bus company in another town.Penny,who owns 20% of the stock,wants nothing to do with the new bus business and will receive a cash distribution.Bluebird will incur about $20,000 of expenses in connection with the liquidation.What tax issues should Victor,Penny,and Bluebird consider with respect to the liquidation?

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?

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 recognized gains on the liquidation are:

Are liquidation and dissolution the same? Explain your answer.

Identify which of the following statements is false.

Albert receives a liquidating distribution from Glidden Corporation as part of a complete redemption of its stock.Albert receives cash of $5,000 and other property with an adjusted basis of $6,000 and an FMV of $10,000.Albert's basis in the Glidden stock surrendered is $8,000.How much gain does he recognize?