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 the Code Sec. 332, what are the tax consequences to Parent, Subsidiary, and MAC
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 the Code Sec. 332, what are the tax consequences to Parent, Subsidiary, and MAC
Chapter6: Corporations: Redemptions And Liquidations
Section: Chapter Questions
Problem 60P
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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
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 the Code Sec. 332, what are the tax consequences to Parent, Subsidiary, and MAC?
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