Parent Corporation for ten years has owned all of the stock of Subsidiary Corporation, which manufactures widgets. Parent's basis in Subsidiary's stock is $500,000. Subsidiary Corporation is insolvent and has no assets to redeem any of the stock that Parent Corporation owns when it liquidates. Nearly all of Subsidiary's gross income during the past five years has come from nonpassive activities. Parent can recognize

Question

Quizplus · Accepted Answer

Since Subsidiary Corporation is insolvent and has no assets to redeem any of the stock that Parent Corporation owns when it liquidates, Parent Corporation can recognize a $500,000 ordinary loss as a result of the liquidation of Subsidiary Corporation.

Parent Corporation for Ten Years Has Owned All of the Stock