03 Feb Parent Corporation owns 100% of Subsidiary Corpora
Parent Corporation owns 100% of Subsidiary Corporation’s stock. The adjusted basis of its stock investment is $175,000. A plan of liquidation is adopted, and Subsidiary distributes to Parent assets having a $400,000 FMV and a $300,000 adjusted basis (to Subsidiary), and liabilities in the amount of $60,000. Subsidiary has a $150,000 E&P balance. a. What are the amount and character of Subsidiary’s recognized gain or loss on the distribution? b. What are the amount and character of Parent’s recognized gain or loss on the surrender of the Subsidiary stock? c. What basis does Parent take in the assets? d. What happens to Parent’s basis in the Subsidiary stock and to Subsidiary’s tax attributes?