VideoGiant Corporation owns all of the common stock of Diode Corporation. VideoGiant's basis in the stock is $10,000,000. Diode owes VideoGiant $1,000,000 on a five year, 10% promissory note issued in connection with an infusion of working capital to Diode two years ago. Diode's assets consist of a factory with a fair market value of $10,000,000 and a basis of $6,000,000 and a patent with a fair market value of $1,000,000 and a basis of $4,000,000. What are the tax consequences if Diode liquidates by transferring the patent to VideoGiant in payment of the promissory note and transferring the factory in cancellation of the stock?

Answer rating: 100% (QA)

VideoGiant would recognize a gain of 4000000 on the transfer of the paten... View the full answer