ABC Corporation (ABC )owns 90% of the single class of stock in Subsidiary Corporation. The other 10% is owned by Rosie, an individual. ABC's basis in its Subsidiary stock is $ 200,000 and Rosie's basis is $90,000. Subsidiary distributes property A having an adjusted basis of $150,000 and an FMV of $720,000 to ABC, and property B with a FMV of $80,000 and an adjusted basis of $60,000 to Rosie in a liquidating distribution. Subsidiary had $10 million of earnings and profits at the date of liquidation. What gain or loss must ABC and Rosie recognize on the liquidating distributions ?

ABC Corporation (ABC )owns 90% of the single class of stock in Subsidiary Corporation. The other 10% is owned by Rosie, an individual. ABC's basis in its Subsidiary stock is $ 200,000 and Rosie's basis is $90,000. Subsidiary distributes property A having an adjusted basis of $150,000 and an FMV of $720,000 to ABC, and property B with a FMV of $80,000 and an adjusted basis of $60,000 to Rosie in a liquidating distribution. Subsidiary had $10 million of earnings and profits at the date of liquidation. What gain or loss must ABC and Rosie recognize on the liquidating distributions ?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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