Subsidiary recognize any gain on redemption and liquidation

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Reference no: EM131503397

Parent Corporation purchased 75 percent of Subsidiary Corporation in 2000; Subsidiary’s current balance sheet shows the following figures:

Basis Value

Demand Deposit $20,000 $20,000

IBM Stock $30,000 $50,000

Parking Lot $5,000 $30,000

Building 0 $100,000

Mortgage ($15,000) ($15,000)

Subsidiary has a net operating loss carryover in 2006 of $7,000 and earnings and profits of $22,000. The subsidiary redeemed in 2003 the 25% shareholder Roy Rogers. The Subsidiary distributed the IBM stock for his 25% interest. In 2006, Subsidary adpots a plan of liquidation.

a. What is the tax result to Roy in 2003? (i.e. realized, recognized gain or loss, tax character)?

b. Does subsidiary recognize any gain on the redemption and the liquidation? (i.e. realized, recognized, and the tax character)?

c. What are Parent’s basis for the assets received?

d. What happens to Subsidiary’s NOL and E&P?

In your analysi give computation anf the IRC section.

Reference no: EM131503397

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