A subsidiary is liquidated pursuant to § 332. The parent has held 100% of the stock in the subsidiary for the past ten years. The subsidiary has E & P of $600,000 at the time of liquidation. The subsidiary's E & P disappears as a result of the liquidation.

Question

Quizplus · Accepted Answer

When a subsidiary is liquidated under § 332, its E&P is not lost, but rather transmits to the parent as a dividend. Therefore, the subsidiary's E&P of $600,000 would be distributed to the parent and would not disappear as a result of the liquidation.

A Subsidiary Is Liquidated Pursuant to § 332