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Subsidiary Liquidation

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1. Subsidiary liquidation

ABC, Inc. owns 95% of the outstanding capital stock of XYZ, Inc. liquidates pursuant to IRC 332 and distributes property, as follows:

To ABC, Inc. FMV $95,000, Basis $40,000
To 5% shareholders FMV $ 5,000, Basis $2,000

Will XYZ, Inc. recognize any gain or loss?

2. Subsidiary liquidation

ABC, Inc. owns 90 % of the outstanding capital stock of XYZ, Inc. Albert Able owns the remaining 10 %. XYZ, Inc owns two assets, as follows:

Asset No.1 FMV $70,000, Basis $30,000
Asset No.2 (cash) $ 30,000

XYZ, Inc. adopts a plan of complete liquidation and distributes its assets, as follows:

To ABC, Inc. Asset No1 and $20,000 cash
To Albert Able $10,000 cash

Will XYZ, Inc. recognize any gain on the distribution ?

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Solution Summary

The solution examines subsidiary liquidation.

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(1) Subsidiary recognizes gains but not losses on distributions of property to minority shareholder [IRC ...

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