T Corporation manufactures handbags and belts.The belt business was acquired from S, who established the business in her home three years ago.S contributed the business to T in a nontaxable transaction under § 351.The handbag business has been operated by T since 1970.Assuming T sells the belt business and distributes the proceeds, the distribution qualifies for partial liquidation treatment.

Question

Quizplus · Accepted Answer

The distribution does not qualify for partial liquidation treatment because the belt business has not been operated by T as a separate and distinct division for at least 5 years prior to the distribution, as required by the IRS for such treatment.

T Corporation Manufactures Handbags and Belts