Exam 6: Corporate Liquidating Distributions

Homewood Corporation adopts a plan of liquidation on June 15 and shortly thereafter sells a parcel of land on which it realizes a $50,000 gain (excluding the effects of a $5,000 sales commission).Homewood pays its legal counsel $2,000 to draft the plan of liquidation.The accountant fees for the liquidation are $1,000,which are also paid during the year.What is Homewood Corporation's realized gain on the sale of land and deductible liquidation expenses?

Identify which of the following statements is false.

Jack has a basis of $36,000 in his 1,000 shares of Acorn Corporation stock (a capital asset).The stock was acquired three years ago.He receives the following distributions as part of a plan of liquidation of Acorn Corporation: What are the amount and character of the gain or loss that Jack will recognize during 2009? During 2010?

Parent Corporation owns 100% of the stock of Subsidiary Corporation.The adjusted basis of its stock investment is $100,000.A plan of liquidation is adopted.Subsidiary distributes to Parent assets with a $325,000 FMV and a $275,000 adjusted basis.Subsidiary also distributes liabilities in the amount of $40,000.Subsidiary has a $150,000 E&P balance. 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?

Liquidating expenses are generally deducted as ordinary and necessary business expenses.

A plan of liquidation must be reduced to writing in order to be accepted by the Internal Revenue Service.

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

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

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?

What event determines when a cash or accrual method of accounting taxpayer reports a liquidating distribution?

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

Prime Corporation liquidates its 85%-owned subsidiary Bass Corporation under the provisions of Secs.332 and 337.Bass Corporation distributes land to its minority shareholder,John,who owns a 15% interest.The property received by John has a $55,000 FMV.The land was used in the Bass Corporation's business and has a $65,000 adjusted basis and is subject to a $10,000 liability,which is assumed by John.John's basis in his stock is $25,000.What gain or loss will John and Bass Corporation recognize on the distribution of the land?

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

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?

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

Dexer Corporation is owned 70% by Amy and 30% by Brad.Dexer Corporation owns Eagle Corporation stock with a $50,000 adjusted basis and a $30,000 FMV.The stock is not disqualified property.As part of a complete liquidation,the Eagle Corporation stock is distributed to Amy.Amy's basis in her Dexer stock is $40,000.Dexer Corporation will recognize

Identify which of the following statements is true.

A Sec.332 liquidation requires a complete statement be filed with the distributee's tax return

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?

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