Question

Corporation W owns 100% of the common stock of Corporation Z with a basis of $300....

Corporation W owns 100% of the common stock of Corporation Z with a basis of $300. Z owns a rental building (its only asset) with a gross fair market value of $3,000, subject to a non-recourse mortgage of $1,200. Z’s adjusted basis for this building is $900. Z has $600 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Z and W do not report on a consolidated basis. Z distributes the building to W in complete liquidation and W sells the building to Corporation V for $1,800 cash, subject to the debt.

a. W recognizes no gain on the liquidation under Section 332.

b. Z has gain on the liquidation under Section 336.

c. W would recognize no gain on the sale to V.

d. None of the above.

e. None of the above.

Homework Answers

Answer #1

Under the given circumstances, W will not recognize any gain on the liquidation under Section 332 according to which no gain or loss should be recognized by the parent company on receipt of property from its subsidiary in complete liquidation. However, Z will recognize a gain on the liquidation under Section 336 because the non-recourse mortgage on the building is greater than Z's basis.

Therefore, both the options a and b are correct.

However, if only one option has to be chosen from the given, option a should be chosen.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Z owns a rental building (its only asset) with a gross fair market value of $5,000...
Z owns a rental building (its only asset) with a gross fair market value of $5,000 subject to the non-recourse mortgage of $2,000. Z’s adjusted basis for this building is $1,500. All of Z’s stock is owned by C, whose basis for his stock in Z is $500. Z had 1,000 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Assume that the corporate tax payable by Z on $3,500 gained is$1250 and...
QUESTION 13 Z owns a rental building (its only asset) with a gross fair market value...
QUESTION 13 Z owns a rental building (its only asset) with a gross fair market value of $5,000 subject to the non-recourse mortgage of $2,000. Z’s adjusted basis for this building is $1,500. All of Z’s stock is owned by C, whose basis for his stock in Z is $500. Z had 1,000 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Assume that the corporate tax payable by Z on $3,500 gained...
QUESTION 21 Corporation Z distributes in kind its long held Apple stock with an adjusted basis...
QUESTION 21 Corporation Z distributes in kind its long held Apple stock with an adjusted basis of $480 and a fair market value of $200 to shareholder C. Corporation Z also distributes Apple stock with an adjusted basis of $120 at a fair market value of $200 to shareholder D. a. Corporation Z does not have loss on the distributions. b. The distributions to C will reduce E&P by $480 (but not create negative E&P). c. Corporation Z realizes gain...
Corporation Z is owned entirely by two individuals, C and D. C owns 60 shares of...
Corporation Z is owned entirely by two individuals, C and D. C owns 60 shares of Z common stock bought in one transaction for $1,200. D owns 40 shares of Z common stock with a basis of $60 per share. The stock’s fair market value is $40 per share. Z’s E&P is $1,000. C sells 60 shares to Z for $1,800. The following statements are with regard to C. a. The redemption will be given dividend treatment. b. The redemption...
Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and...
Bob contributed to AlphaBeta Corporation a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for 50 percent of the voting common stock (the only class of stock) of the AlphaBeta Corporation. The AlphaBeta Corporation will assume the mortgage on the building. As part of the same transaction, Al contributed to AlphaBeta Corporation cash of $30,000 in exchange for the other 50 percent...
QUESTION 1 C contributes to Z, a newly formed corporation, property worth $400 with a basis...
QUESTION 1 C contributes to Z, a newly formed corporation, property worth $400 with a basis of $300 in exchange for 100 shares. As a part of the same transaction, D (an employee of C) contributes to Z property worth $100 with a basis of $40 in exchange for 400 shares a. This is most likely not a good 351. C must recognize $100 of gain and D $50 of gain. b. This is not a good 351 because receipt...
Flag Nick and Danielle decided to liquidate their jointly owned corporation, Dannick Corporation. After liquidating its...
Flag Nick and Danielle decided to liquidate their jointly owned corporation, Dannick Corporation. After liquidating its remaining inventory and paying off its remaining liabilities, Dannick owned cash of $400,000; equipment with a basis of $200,000 and a fair market value of $400,000; and a building with a basis of $300,000 and a fair market value of $200,000. Under the terms of the agreement, Nick will receive the $400,000 cash in exchange for his 40 percent interest in Dannick. Nick’s basis...
Duval Corporation is a calendar year taxpayer. Polly owns all of its stock. Her basis for...
Duval Corporation is a calendar year taxpayer. Polly owns all of its stock. Her basis for the stock is $12,000. On April 1 of the current​ (non-leap) year Duval distributes $54,000 to Polly. a b c d Distribution Dividend income Remaining distribution Return of Capital Capital gain (loss) Carryforward Accumulated E&P Instructions: Determine the tax consequences of the cash distribution in each of the following independent​ situations: a) Current​ E&P of $25,000​; accumulated​ E&P of $15,000. b) Current​ E&P of...
Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to...
Bob contributed to the AlphaBeta Partnership, a general partnership, a building with an adjusted basis to Bob of $50,000 and a fair market value of $150,000 that was subject to a mortgage of $120,000 in exchange for a 50 percent interest in the AlphaBeta Partnership. The AlphaBeta Partnership will assume the mortgage on the building. At the same time, Al contributed to AlphaBeta Partnership cash of $30,000 in exchange for the other 50 percent interest in the AlphaBeta Partnership. In...
Amy owns 500 shares of Dalek Corporation with a stock basis of $50,000. Total outstanding shares...
Amy owns 500 shares of Dalek Corporation with a stock basis of $50,000. Total outstanding shares of Dalek Corporation are 1,000. Of the remaining 500 shares, 50 shares are owned by River (her daughter), and the remaining 450 shares of Dalek Corporation are owned by an unrelated shareholder. Dalek Corporation has E&P of $640,000. What are the tax consequences to Amy if in a stock redemption; Dalek redeems 100 shares from Amy for $30,000? What are the tax consequences to...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT