Identify which of the following statements is true.
A)A parent corporation cannot liquidate a subsidiary corporation (having but a single class of stock)and avoid recognizing its realized gain unless the parent corporation owns at least 80% of the subsidiary's stock.
B)The liquidation of a subsidiary corporation must be completed within one tax year to receive nonrecognition treatment.
C)The provisions permitting a tax-free liquidation of a subsidiary corporation apply to both corporate and noncorporate shareholders of the subsidiary.
D)All of the above are false.

Question

Quizplus · Accepted Answer

This statement is true according to the rules of liquidation of a subsidiary corporation. The parent corporation must own at least 80% of the subsidiary's stock to avoid recognizing its realized gain. The other statements in options B and C are false. There is no specific time limit for completing the liquidation of a subsidiary, and the tax-free liquidation provisions apply only to corporate shareholders.

Identify Which of the Following Statements Is True