Parent Corporation owns 100% of the single class of stock of Subsidiary Corporation. Parent's basis in the Subsidiary stock is $500,000 when Parent completely liquidates Subsidiary Corporation within a single tax year. The Subsidiary Corporation assets have a $700,000 adjusted basis and an $800,000 FMV at liquidation. As a result of the liquidation, Parent must recognize a

Question

Quizplus · Accepted Answer

Under IRC Section 332, a parent corporation does not recognize gain or loss on the liquidation of a subsidiary if it owns at least 80% of the subsidiary's stock. Since Parent Corporation owns 100% of Subsidiary Corporation, no gain is recognized.

Parent Corporation Owns 100% of the Single Class of Stock