QUESTION 19

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.

   Same facts as above, except that besides W Corporation several shareholders own Zs pure preferred outstanding stock which represents 1/4 of the Zs equity value and which is entitled to 1/4 of Zs net asset value upon liquidation. Assume 1504(a)(4)(C) is met.

   	a.	332 does not apply because W does not own 80% of the voting stock and value of all classes of stock.
   	b.	Neither W nor the pure preferred shareholders would recognize gain.
   	c.	Z would recognize no gain on a distribution of the building in-kind proportionately to W and the pure preferred shareholders.
   	d.	Z would recognize gain under 337 on the distribution of the building in-kind since neither shareholder is an 80% distributee.
   	e.	None of the above.