R Corporation, a men's clothing retailer, purchased all of the stock of L Corporation, a women's clothing retailer, for $200,000 as part of a plan to diversify.But L Corporation became insolvent, with liabilities of $500,000 and assets of $350,000.R decided to liquidate L.R's tax loss related to the liquidation is

Question

Quizplus · Accepted Answer

R Corporation's tax loss related to the liquidation of L Corporation is the difference between the purchase price of L Corporation's stock ($200,000) and the value of the assets received upon liquidation ($0, since liabilities exceed assets). Therefore, the tax loss is $200,000.

R Corporation, a Men's Clothing Retailer, Purchased All of the Stock