B Corporation purchased an investment asset in 2001for $16,000.On January 1, 2012, C Corporation purchases all the stock of B.B's basis in the investment asset at the time of the stock purchase was $9,000.If B sells the investment in 2012 when B and C filed a consolidated tax return, how much will be considered to be a built-in deduction?

Question

Quizplus · Accepted Answer

When C Corporation purchased all the stock of B Corporation, the basis of the investment asset was adjusted to its fair market value at the time, which is not given in the problem. Therefore, we cannot use the original $16,000 cost basis or the $9,000 B's basis as the new basis. However, we know that if B sells the investment asset, the built-in deduction will be the difference between the fair market value of the asset at the time of the stock purchase and the sale price. Since B's basis was $9,000 and the sale price is not given, the most we can deduct is $9,000. Therefore, the correct answer is B.

B Corporation Purchased an Investment Asset in 2001for $16,000