Apply at the shareholder level rather than at the

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Unformatted text preview: D PM#31 R 3-99 Page 43 Sky Corp. was a wholly-owned subsidiary of Jet Corp. Both corporations were domestic C corporations. Jet received a liquidating distribution of property in cancellation of its Sky stock when Jet's tax basis in Sky stock was $100,000. The distributed property had an adjusted basis of $135,000 and a fair market value of $250,000. What amount of taxable gain did Jet, the parent corporation, recognize on the receipt of the property? a. b. c. d. $250,000 $150,000 $35,000 $0 CPA-02256 Explanation Choice "d" is correct. No gain is recognized by Jet Corporation, the parent, upon the liquidation of Sky Corporation. Rule: No gain or loss is generally recognized in connection with the complete liquidation of a controlled subsidiary (e.g., Sky Corp.) into its parent corporation (e.g., Jet Corp.). (Note: In addition, any unused net operating loss carryovers or charitable contribution carryovers would be transferred to the successor parent corporation.) Explanation: Sky...
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This note was uploaded on 06/14/2013 for the course ACCOUNTING Regulation taught by Professor Becker during the Fall '10 term at Keller Graduate School of Management.

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