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41) Parent Corporation for ten years has owned all of

Question : 41) Parent Corporation for ten years has owned all of : 1876441

41) 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

A) a $500,000 short-term capital loss.

B) a $500,000 long-term capital loss.

C) a $500,000 ordinary loss.

D) a $500,000 bad debt deduction.

42) Ball Corporation owns 80% of Net Corporation's stock and Jack owns the remaining 20% of Net Corporation's stock. Ball's basis in the Net stock is $200,000 and Jack's basis in the Net stock is $100,000. Under a plan of complete liquidation, Ball Corporation receives property with an adjusted basis of $400,000 and an FMV of $800,000 and Jack receives property with an adjusted basis of $50,000 and an FMV of $200,000. Ball and Jack's recognized gains on the liquidation are:

A)

Ball

Jack

$0

$0

B)

Ball

Jack

$0

$100,000

C)

Ball

Jack

$200,000

$50,000

D)

Ball

Jack

$600,000

$100,000

43) Ball Corporation owns 80% of Net Corporation's stock and Jack owns the remaining 20% of Net Corporation's stock. Ball's basis in the Net stock is $200,000 and Jack's basis in the Net stock is $100,000. Under a plan of complete liquidation, Ball Corporation receives property with an adjusted basis of $400,000 and an FMV of $800,000 and Jack receives property with an adjusted basis of $50,000 and an FMV of $200,000. Ball and Jack's bases in the property received are:

A)

Ball

Jack

$800,000

$200,000

B)

Ball

Jack

$400,000

$200,000

C)

Ball

Jack

$400,000

$ 50,000

D)

Ball

Jack

$200,000

$100,000

44) Market Corporation owns 100% of Subsidiary Corporation's stock. Market Corporation completely liquidates Subsidiary Corporation, receiving land with a $400,000 adjusted basis and a $500,000 FMV in exchange for Subsidiary stock, which has a $300,000 adjusted basis. Market Corporation has a basis in the land of

A) $300,000.

B) $400,000.

C) $500,000.

D) none of the above

45) Dusty Corporation owns 90% of Palace Corporation's stock and Susan owns the remaining stock. Dusty Corporation's stock basis is $300,000 and Susan's stock basis is $20,000. Under a plan of complete liquidation, Dusty Corporation receives property with a $400,000 adjusted basis and a $540,000 FMV and Susan receives property with a $20,000 adjusted basis and a $60,000 FMV. The bases of the properties are:

A)

Dusty

Susan

$300,000

$20,000

B)

Dusty

Susan

$400,000

$20,000

C)

Dusty

Susan

$400,000

$60,000

D)

Dusty

Susan

$540,000

$60,000

46) Identify which of the following statements is false.

A) Minority shareholders involved in a Sec. 332 subsidiary liquidation must recognize a gain or loss under the Sec. 331 general liquidation rules.

B) The parent corporation takes a basis in property received when liquidating a subsidiary corporation in a Sec. 332 liquidation equal to its basis to the subsidiary corporation.

C) Section 332 is applicable to both the parent corporation and the minority shareholders if they exist.

D) Property received by a minority shareholder takes a basis equal to its fair market value.

47) Identify which of the following statements is false.

A) Liquidating distributions made to minority shareholders in the tax-free liquidation of a controlled subsidiary corporation are treated by the liquidating corporation in the same way as nonliquidating distributions.

B) Sec. 337(a) provides that the liquidating corporation recognizes no gain or loss on the distribution of property to the 80% distributee in a complete Sec. 332 liquidation.

C) The depreciation recapture provisions in Secs. 1245 and 1250 override the Sec. 337(a) nonrecognition rule if a controlled subsidiary corporation is liquidated into its parent corporation.

D) A corporation that distributes the stock of a subsidiary may elect to treat the distribution as a sale of the subsidiary's assets.

48) Lake City Corporation owns all 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. Columbia's gain with respect to the distribution will be

A) no gain recognized.

B) $200,000.

C) $300,000.

D) $500,000.

49) 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

A) 0.

B) $200,000.

C) $500,000.

D) cannot be determined from the facts presented

50) The general rule for tax attributes of liquidating corporations is

A) they disappear when the liquidation is complete.

B) they carry over for five years.

C) they disappear only for controlled subsidiary corporations.

D) they carry over for an indefinite period of time.

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