Corporate Distributions in Complete Liquidations.

Corporation A owns 100 percent of the stock of Corporation B, and also owns B Corporation debentures with a face amount (and basis) of $200,000. A plan of liquidation is adopted and Corporation B is liquidated under Code Sec.332.

Pursuant to the liquidation, Corporation B inventory with a FMV of $200,000 and a basis of $140,000 in cancellation of the debentures.
a. How much gain is recognized by B Corporation on the distribution of the inventory to Corporation A?

b. What is Corporation A's tax basis for the inventory received from Corporation B?

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...ince no gain or loss is recognized.
Code Sec. 332 provides NON-RECOGNITION of gain or loss on the distribution. The corporate shareholder must own ³ ...