Section 332 cannot apply to a parent-subsidiary liquidation if the subsidiary corporation is insolvent on the date of the liquidation.

Question

Quizplus · Accepted Answer

Section 332 of the Internal Revenue Code allows parent corporations to liquidate their subsidiary corporations tax-free if certain requirements are met. However, one of these requirements is that the subsidiary corporation must not be insolvent on the date of the liquidation. Therefore, if the subsidiary corporation is insolvent, Section 332 cannot apply to the parent-subsidiary liquidation.

Section 332 Cannot Apply to a Parent-Subsidiary Liquidation If the Subsidiary