QUESTION 15

1. Corporation W owns 100% of the common stock of Corporation Z with a basis of $300. Z owns a rental building (its only asset) with a gross fair market value of $3,000, subject to a non-recourse mortgage of $1,200. Zs adjusted basis for this building is $900. Z has $600 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Z and W do not report on a consolidated basis. Z distributes the building to W in complete liquidation and W sells the building to Corporation V for $1,800 cash, subject to the debt.

   	a.	W recognizes no gain on the liquidation under Section 332.
   	b.	Z has gain on the liquidation under Section 336.
   	c.	W would recognize no gain on the sale to V.
   	d.	All of the above.
   	e.	Both A and C of the above.

2 points

QUESTION 16

1. Corporation W owns 100% of the common stock of Corporation Z with a basis of $300. Z owns a rental building (its only asset) with a gross fair market value of $3,000, subject to a non-recourse mortgage of $3,300 . Zs adjusted basis for this building is $900. Z has $600 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Z and W do not report on a consolidated basis. Z distributes the building to W in complete liquidation and W sells the building to Corporation V for $1,800 cash, subject to the debt.

   Same facts as above, except that the liability on the building is $3,300 rather than $1,200.

   	a.	W recognizes no gain or loss on the liquidation under Section 332.
   	b.	Z recognizes $2,400 gain under Section 336.
   	c.	Neither of the above.
   	d.	Both A and B of the above.