Parent Corporation owns 100 of Subsidiary Corporations single class of stock and $2 million of Subsidiary debentures Parent purchased the debentures in small blocks from various unrelated parties at a $100,000 discount from their face amount Parent has a $1 3 million basis in the Subsidiary stock S...

a Distribution with respect to stock 1600000 realized gain 4000000 FMV ...

Parent Corporation owns 100% of Subsidiary Corporations single class of stock and $2 million of Subsidiary debentures

Question:

Parent owns 100% of Subsidiary Corporation’s single class of stock and $2 million of Subsidiary . Parent purchased the in small blocks from various unrelated parties at a $100,000 discount from their face amount. Parent has a $1.3 million basis in the Subsidiary stock. Subsidiary adopts a plan of whereby it distributes property having a $4 million FMV and a $2.4 million adjusted basis in redemption of the Subsidiary stock. The are redeemed for Subsidiary property having a $2 million FMV and a $2.2 million adjusted basis.
a. What income or gain does Subsidiary recognize as a result of making the liquidating distributions?
b. What gain or loss does Parent recognize on the surrender of the Subsidiary stock? The Subsidiary ?
c. What is Parent’s basis for the property received from Subsidiary?
Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Liquidation
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due....