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 ?
(1) Subsidiary recognizes gains but not losses on distributions of property to minority shareholder [IRC ...
The solution examines subsidiary liquidation.