Parent Corporation purchased 80 percent of the stock of Subsidiary Corporation in one transaction for ($ 200,000).
Question:
Parent Corporation purchased 80 percent of the stock of Subsidiary Corporation in one transaction for \(\$ 200,000\). The remaining 20 percent is owned by the MAC partnership. Subsidiary's only asset is an office building depreciated on the straight-line method, with an adjusted basis of \(\$ 50,000\) and a value of \(\$ 400,000\). It is subject to a mortgage of \(\$ 140,000\).
a. If Parent makes a Code Sec. 338 election, what are the tax consequences to Parent, Subsidiary and MAC?
b. If Parent does not make a Code Sec. 338 election and liquidates Subsidiary under Code Sec. 332, what are the tax consequences to Parent, Subsidiary, and MAC?
Step by Step Answer:
CCH Federal Taxation 2019 Comprehensive Topics
ISBN: 9780808049081
2019 Edition
Authors: Ephraim P. Smith, Philip J. Harmelink, James R. Hasselback