Explain the nonrecognition rules of section 332

Explain the nonrecognition rules of section 332 - be...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Explain the nonrecognition rules of section 332. The non recognition of section 332 applies only if the following three requirements are met: 80% of ownership, cancellation of stock, and timing. The parent corporation must own at least 80 Percent of the combined voting power and at least 80 percent of the total value of all the stock of the subsidiary corporation on the date that the plan of liquidation is adopted and at all times until the subsidiary’s liquidation is completed. The parent corporation must satisfy this ownership requirement directly The second requirement is that there must be a distribution in complete cancellation of all of the subsidiary’s stock pursuant to a plan of complete liquidation. A minimal amount of assets may
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: be retained by the subsidiary in order to protect its legal existence and preserve its corporate charter. There is a certain time period required for the liquidating distributions to occur. If all liquidating distributions are made within one taxable year of the subsidiary, no formal plan of liquidation needs to be used. However, if the liquidating distributions extend beyond one taxable year, a formal plan of liquidation must be adopted and all liquidating distributions must be made within three taxable years of the close of the taxable year in which the first distribution is made. If the liquidation is not achieved within the specified period of time the liquidation will not be accepted under code Sec 332....
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern