CHAPTER20SOLUTIONS - CHAPTER 20 SOLUTIONS END OF CHAPTER...

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CHAPTER 20 SOLUTIONS END OF CHAPTER QUESTIONS COVERED IN LECTURE – NOT COLLECTED : 7, 8, 9, 10, 11, 14, 15, 16, (16 Not Included Homework Problem), 17, 25, 26, 27, AND 29. 7. The statement is incorrect. When a subsidiary corporation liquidates under § 332, gains and losses are not recognized on distributions to the parent corporation. However, distributions to minority shareholders are subject to the same rules applicable to nonliquidating distributions. That is, the subsidiary recognizes gains (but not losses) on distributions to minority shareholders. pp. 20-10 and 20-11 8. When § 332 applies, the subsidiary does not recognize gain or loss upon the transfer of property to the parent. This is the case even if the transfer satisfies a debt. The parent corporation may recognize a gain or loss on the receipt of property in satisfaction of indebtedness, however. Examples 16 and 17 9. Condor will recognize no gain or loss and will have a carryover basis of $1 million in Dove’s carryover). Condor’s basis in the Dove stock disappears. Dove recognizes no gain or loss on the liquidation. pp. 20-10 to 20-12 10. For § 338 to apply, the parent must ‘‘purchase’’ within a 12-month period at least 80% of the voting power and at least 80% of the value of the acquired corporation. ‘‘Purchase’’ is defined by § 338(h)(3) to include all acquisitions of stock except the following: (1) a transaction where basis of the stock is the same as in the hands of the transferor, (2) an acquisition of stock by inheritance, (3) a transaction where § 351 applies, and (4) an acquisition of stock from a related party where ownership of the stock would have been attributed to the transferee under § 318. The acquiring corporation must then make the § 338 election by the 15th day of the ninth month following the month of the ‘‘qualified stock purchase.’’ p. 20-13 11. Upon a § 338 election, the subsidiary is treated as having sold its assets on the date of the qualified stock purchase. The deemed selling price is determined with reference to the
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This note was uploaded on 06/11/2008 for the course ACCT 4153 taught by Professor Campbell during the Fall '08 term at The University of Texas at San Antonio- San Antonio.

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CHAPTER20SOLUTIONS - CHAPTER 20 SOLUTIONS END OF CHAPTER...

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