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:
Tax Consequences a Code Sec 338 Election Parent Tax basis in Subsidiary stock This remains 200000 actual purchase price Tax basis in Subsidiarys asset...View the full answer
CCH Federal Taxation 2019 Comprehensive Topics
ISBN: 9780808049081
2019 Edition
Authors: Ephraim P. Smith, Philip J. Harmelink, James R. Hasselback
