Packard Corporation transferred its 100 percent interest to State Corporation as part of a complete liquidation of State.In the exchange Packard received land with a fair market value of $300,000.Packard's basis in the State stock was $600,000.The land had a basis to State Company of $500,000.What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives?
A)$200,000 loss recognized by State and a basis in the land of $300,000.
B)$200,000 loss recognized by State and a basis in the land of $500,000.
C)No loss recognized by State and a basis in the land of $300,000.
D)No loss recognized by State and a basis in the land of $500,000.

Question

Quizplus · Accepted Answer

In a complete liquidation of a subsidiary, losses are generally not recognized. Packard's basis in the land would be the same as State's basis in the land, which is $500,000, to ensure continuity of investment.

Packard Corporation Transferred Its 100 Percent Interest to State Corporation