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

Question

Quizplus · Accepted Answer

The basis in the property received by Parent Corporation will be equal to the adjusted basis of the property in the hands of Subsidiary Corporation. Since the property has an adjusted basis of $70,000, Parent Corporation's basis in the property will also be $70,000. The fact that Parent Corporation also owns Subsidiary Corporation's stock is irrelevant for determining the basis in the property received for the bonds.

Parent Corporation Owns All of Subsidiary Corporation's Stock