Parent Corporation owns 100 of Subsidiary Corporations single class of stock Its adjusted basis for the stock is $175,000 After adopting a plan of liquidation, Subsidiary distributes the following property to Parent money, $20,000 LIFO inventory, $200,000 FMV and equipment, $150,000 FMV The invento...

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Parent Corporation owns 100% of Subsidiary Corporations single class of stock. Its adjusted basis for the stock

Question:

Parent owns 100% of Subsidiary Corporation’s single class of stock. Its adjusted basis for the stock is $175,000. After adopting a plan of Subsidiary distributes the following property to Parent: money, $20,000; LIFO inventory, $200,000 FMV; and equipment, $150,000 FMV. The inventory has a $125,000 adjusted basis. The equipment originally cost $280,000. Subsidiary has claimed depreciation of $160,000 on the equipment. Subsidiary has a $150,000 E&P balance and a $40,000 NOL carryover on the date.
a. What are the amount and character of Subsidiary’s recognized gain or loss when it makes the liquidating distributions?
b. What are the amount and character of Parent’s recognized gain or loss on its surrender of the Subsidiary stock?
c. What is Parent’s basis in each noncash property?
d. What happens to Subsidiary’s E&P balance and NOL carryover following the What happens to Parent’s $175,000 basis in the Subsidiary stock? Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Liquidation
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due....