Which statement is true with regard to the complete liquidation of a calendar ye
ID: 2555428 • Letter: W
Question
Which statement is true with regard to the complete liquidation of a calendar year subsidiary which is 90% owned by its parent?
A formal plan of liquidation must be adopted if the shareholders adopt a resolution authorizing the distribution on 1/14/x5 and the liquidating distributions occur on 6/10/x6 and 11/10/x7.
The minority shareholders do not recognize gain or loss.
The subsidiary doesn't recognize gain or loss on its distributions to the minority shareholders.
No gain or loss is recognized by the parent corporation and the parent has a fair markey value basis in the assets received.
More than one statement is true.
a.A formal plan of liquidation must be adopted if the shareholders adopt a resolution authorizing the distribution on 1/14/x5 and the liquidating distributions occur on 6/10/x6 and 11/10/x7.
b.The minority shareholders do not recognize gain or loss.
c.The subsidiary doesn't recognize gain or loss on its distributions to the minority shareholders.
d.No gain or loss is recognized by the parent corporation and the parent has a fair markey value basis in the assets received.
e.More than one statement is true.
Explanation / Answer
Solution: The subsidiary doesn't recognize gain or loss on its distributions to the minority shareholders.
Explanation: In complete liquidation no gain or loss shall be recognized by 90% owned subsidiary on distribution to parent corporation. Parent can liquidate also however the subsidiary is required to liquidate first to meet the technical requirements of §332
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