Gains and losses are recognized to a subsidiary corporation if the parent corporation makes the § 338 election.

Question

Quizplus · Accepted Answer

If the parent corporation makes a § 338 election, the subsidiary corporation's gains and losses are recognized by the parent corporation as if the subsidiary were selling all its assets and distributing the proceeds in a liquidating distribution. This allows the parent corporation to increase its basis in the subsidiary's assets and take advantage of any unused tax benefits, such as net operating losses or tax credits.

Gains and Losses Are Recognized to a Subsidiary Corporation If