Cardinal Corporation has a basis of $800,000 in the stock of Finch Corporation,a subsidiary in which it owns 90% of all classes of stock.Cardinal has maintained this ownership interest for more than four years.In the current year,Cardinal liquidates Finch Corporation and acquires assets worth $1,300,000 and with an adjusted basis to Finch of $750,000.At the time of liquidation,Finch had E & P of $400,000,and a short-term capital loss carryover of $25,000.
a.What is the recognized gain or loss to Finch and to Cardinal as a result of Finch's liquidation?
b.What basis will Cardinal Corporation have in the assets acquired from Finch Corporation?
c.What happens to Finch's E & P and short-term capital loss carryover?

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The Answer of Cardinal Corporation has a basis of $800,000 in the stock of Finch Corporation,a subsidiary in which it owns 90% of all classes of stock.Cardinal has maintained this ownership interest for more than four years.In the current year,Cardinal liquidates Finch Corporation and acquires assets worth $1,300,000 and with an adjusted basis to Finch of $750,000.At the time of liquidation,Finch had E & P of $400,000,and a short-term capital loss carryover of $25,000.
a.What is the recognized gain or loss to Finch and to Cardinal as a result of Finch's liquidation?
b.What basis will Cardinal Corporation have in the assets acquired from Finch Corporation?
c.What happens to Finch's E & P and short-term capital loss carryover?

Cardinal Corporation Has a Basis of $800,000 in the Stock