Assuming a proper election has been made under § 338, a subsidiary corporation determines its basis in assets as equal to the price that the parent corporation paid for the subsidiary's stock, adjusted by liabilities of the subsidiary and its ownership percentage.

Question

Quizplus · Accepted Answer

This statement is true. When a parent corporation makes a § 338 election, the subsidiary corporation is treated as if it had sold all of its assets to a new corporation and then liquidated, resulting in the step-up in basis of the subsidiary's assets. The subsidiary's basis in its assets is then determined based on the price paid for its stock by the parent corporation, adjusted by its liabilities and the parent corporation's ownership percentage.

Assuming a Proper Election Has Been Made Under § 338