Brown Corporation purchased 85% of the stock of Green Corporation five years ago for $850,000.In the current year, Brown Corporation liquidates Green Corporation and acquires assets with a basis to Green Corporation of $700,000 (fair market value of $1.1 million).Brown Corporation will have a basis in the assets of $700,000, the same as Green's basis in the assets.

Question

Quizplus · Accepted Answer

When one corporation acquires the assets of another corporation that it had previously owned a majority interest in, the basis in the assets to the acquiring corporation will be the same as the basis the acquired corporation had in the assets. Therefore, Brown Corporation will have a basis of $700,000 in the assets it acquires from Green Corporation.

Brown Corporation Purchased 85% of the Stock of Green Corporation