Daisy Corporation is the sole shareholder of Ostrich Corporation,which it hopes to sell within the next three years.The Ostrich stock (basis of $25 million)is currently worth $30 million,but Daisy believes that it would be easier to find a buyer if it was worth less.To lower the value of its stock,Ostrich distributes $4 million cash to Daisy (sufficient E & P exists to cover the distribution).At a later date,Daisy sells Ostrich for $26 million.

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The Answer of Daisy Corporation is the sole shareholder of Ostrich Corporation,which it hopes to sell within the next three years.The Ostrich stock (basis of $25 million)is currently worth $30 million,but Daisy believes that it would be easier to find a buyer if it was worth less.To lower the value of its stock,Ostrich distributes $4 million cash to Daisy (sufficient E & P exists to cover the distribution).At a later date,Daisy sells Ostrich for $26 million.

Daisy Corporation Is the Sole Shareholder of Ostrich Corporation,which It