Parent Corporation has owned 60% of Subsidiary Corporations single class of stock for a number of years.

Question:

Parent has owned 60% of Subsidiary Corporation’s single class of stock for a number of years. Tyrone owns the remaining 40% of the Subsidiary stock. On August 10 of the current year, Parent purchases Tyrone’s Subsidiary stock for cash. On September 15, Subsidiary adopts a plan of Subsidiary then makes a single liquidating on October 1. The activities of Subsidiary continue as a separate division of Parent. Does the of Subsidiary qualify for nonrecognition treatment under Secs. 332 and 337? Must Parent assume Subsidiary’s E&P balance?
A partial list of research sources is
• IRC Secs. 332(b) and 381
• Reg. Sec. 1.332-2(a)
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