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Taxation - Must Parent assume Subsidiary's E&P balance

Parent Corporation has owned 60% of Subsidiary Corporation's single class of stock for a number of years. Tyrone owns the remaining 40% of the Subsidiary stock. On August 10 of the current year, Parent purchases Tyrone's Subsidiary stock for cash. On September 15, Subsidiary adopts a plan of liquidation. Subsidiary then makes a single liquidating distribution on October 1. The activities of Subsidiary continue as a separate division of Parent. Does the liquidation of Subsidiary qualify for nonrecognition treatment under Secs. 332 and 337? Must Parent assume Subsidiary's E&P balance?

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Parent Corporation has owned 60% of Subsidiary Corporation's single class of stock for a number of years. Tyrone owns the remaining 40% of the Subsidiary stock. On August 10 of the current year, Parent purchases Tyrone's Subsidiary stock for cash. On September 15, Subsidiary adopts a plan of liquidation. Subsidiary then makes a single liquidating distribution on October 1. The activities of Subsidiary continue as a separate division of Parent. Does the liquidation of Subsidiary qualify for non-recognition treatment under Secs. 332 and 337? Must Parent assume Subsidiary's E&P balance?
A partial list of research sources is
IRC Secs. 332 (b) and 381
Reg. Sec. 1.332-2 (a)
Under Secs. 332, it has the exceptions from any general 331(a) general recognition rule distributions that are in the complete liquidation of any subsidiaries. As such, under specific conditions, neither gain nor loss is recognized by the parent corporation on the subsequent receipt of any property as distributed in the subsidiary's complete liquidation. Concurrently, under section 337, an exception is granted at the corporate level ...

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Why must a parent assume subsidiary's E&P balances in taxation are examined.

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