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Parent Corporation for ten years has owned all of the stock of Subsidiary Corporation, which manufactures widgets. Parent's basis in Subsidiary's stock is $500,000. Subsidiary Corporation is insolvent and has no assets to redeem any of the stock that Parent Corporation owns when it liquidates. Nearly all of Subsidiary's gross income during the past five years has come from nonpassive activities. Parent can recognize:

a. a $500,000 short-term capital loss.

b. a $500,000 long-term capital loss.

c. a $500,000 ordinary loss.

d. a $500,000 bad debt deduction.

Reference no: EM13135817

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