P Corporation owns 100 percent of R Corporation.P operates a car dealership while R owns a chain of quick-lube franchises.P established R 10 years ago but now finds it advisable to narrow its business focus.P distributes all of its shares in R to its shareholders.The distribution is a taxable dividend distribution.

Question

Quizplus · Accepted Answer

The distribution of R Corporation's shares by P Corporation to its shareholders can be structured as a tax-free spin-off under certain conditions, rather than a taxable dividend distribution. This allows P Corporation to narrow its business focus without triggering a taxable event for the distribution of R's shares.

P Corporation Owns 100 Percent of R Corporation