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Parent Corporation purchased 80 percent of the stock of Subsidiary Corporation in one transaction for $200,000. The remaining 20 percent is owned by the MAC partnership. Subsidiary's only asset is an office building depreciated on the straight-line method, with an adjusted basis of $50,000 and a value of $400,000. It is subject to a mortgage of $140,000. a. If Parent makes a Code Sec. 338 election, what are the tax consequences to Parent, Subsidiary and MAC? b. If Parent does not make a Code Sec 338 election and liquidates Subsidiary under the Code Sec. 332, what are the tax consequences to Parent, Subsidiary, and MAC

Parent Corporation purchased 80 percent of the stock of Subsidiary Corporation in one transaction for $200,000. The remaining 20 percent is owned by the MAC partnership. Subsidiary's only asset is an office building depreciated on the straight-line method, with an adjusted basis of $50,000 and a value of $400,000. It is subject to a mortgage of $140,000. a. If Parent makes a Code Sec. 338 election, what are the tax consequences to Parent, Subsidiary and MAC? b. If Parent does not make a Code Sec 338 election and liquidates Subsidiary under the Code Sec. 332, what are the tax consequences to Parent, Subsidiary, and MAC

FINANCIAL ACCOUNTING
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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Parent Corporation purchased 80 percent of the stock of Subsidiary Corporation in one transaction for $200,000. The remaining 20 percent is owned by the MAC partnership. Subsidiary's only asset is an office building depreciated on the straight-line method, with an adjusted basis of $50,000 and a value of $400,000. It is subject to a mortgage of $140,000.

a. If Parent makes a Code Sec. 338 election, what are the tax consequences to Parent, Subsidiary and MAC?

b. If Parent does not make a Code Sec 338 election and liquidates Subsidiary under the Code Sec. 332, what are the tax consequences to Parent, Subsidiary, and MAC?

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