The stock of Cardinal Corporation is held as follows: 85% by Blue Jay Corporation (basis of $800,000)and 15% by Samuel (basis of $60,000).Cardinal Corporation is liquidated on October 20,2008,pursuant to a plan adopted on January 9,2008.Pursuant to the liquidation,Cardinal Corporation distributed Asset A (basis of $550,000,fair market value of $850,000)to Blue Jay,and Asset B (basis of $200,000,fair market value of $150,000)to Samuel.No election is made under § 338.With respect to the liquidation of Cardinal:

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Samuel's tax consequences are governed under § 331 where sale or exchange treatment results in a gain of $90,000 [$150,000 (fair market value of Asset B)- $60,000 (basis in stock)].The liquidating distribution of Asset A to Blue Jay is pursuant to a § 332 parent-subsidiary liquidation; thus,Cardinal does not recognize any gain on the distribution,and Blue Jay takes a carryover basis in the asset,or $550,000.In distributions from a subsidiary corporation to a minority shareholder,pursuant to a § 332 parent-subsidiary liquidation,losses are not recognized.

The Stock of Cardinal Corporation Is Held as Follows: 85