Lake City Corporation owns all of the stock in Columbia Corporation. Pursuant to a plan of complete liquidation, Columbia distributes land having a $500,000 FMV and a $200,000 basis to Lake City. Lake City's basis in the land will be
A)0)
B)$200,000.
C)$500,000.
D)cannot be determined from the facts presented

Question

Quizplus · Accepted Answer

Lake City's basis in the land will be $200,000, which is the basis of Columbia Corporation in the land at the time of the distribution. In a liquidation where a parent corporation owns 100% of a subsidiary, the parent corporation takes a carryover basis in the assets received.

Lake City Corporation Owns All of the Stock in Columbia