Q Corporation is a wholly owned subsidiary of P Corporation.P has an account receivable from Q in the amount of $50,000.As a part of a complete liquidation, Q transfers property (fair market value of $50,000 and basis of $30,000) to P in settlement of the debt.What is the amount of gain that Q should recognize?
A)$20,000
B)$30,000
C)$0
D)$50,000

Question

Quizplus · Accepted Answer

Since Q is a wholly owned subsidiary of P, the transfer of property in settlement of the debt does not result in a taxable gain or loss for Q. The transfer is treated as a contribution to capital by the parent company, P. Therefore, Q should recognize $0 gain in this transaction.

Q Corporation Is a Wholly Owned Subsidiary of P Corporation