C:6-44 Liquidation of a Subsidiary Corporation.

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, $200,00 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 liquidation date.

a. What are the amount and character of Subsidiarys recognized gain or loss when it makes the liquidating distributions?

b. What are the amount and character of Parents recognized gain or loss on its surrender of the Subsidiary stock?

c. What is Parents basis in each noncash property?

d. What happens to Subsidiarys E&P balance and NOL carryover following the liquidation?

e. What happens to Parents $175,000 basis in the Subsidiary stock?