Parent Corporation owns all of Subsidiary Corporation's stock. In addition, Parent Corporation owns $100,000 (face amount and basis)of Subsidiary Corporation's bonds. When Subsidiary Corporation is completely liquidated, it distributes property with a $70,000 adjusted basis and a $100,000 FMV to Parent Corporation in redemption of the Subsidiary Corporation bonds. Following the liquidation, Parent Corporation will have a basis in the Subsidiary Corporation property received for the bonds of
A)$0.
B)$70,000.
C)$100,000.
D)none of the above

Question

Quizplus · Accepted Answer

When Subsidiary Corporation distributes property to redeem the bonds, Parent Corporation will have a basis in the distributed property equal to the adjusted basis of the bonds, which is $70,000. Therefore, the correct answer is B.

Parent Corporation Owns All of Subsidiary Corporation's Stock