Tax consequences of liquidation to magenta-fuchsia-marta

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Reference no: EM133208325

The stock of Magenta Corporation is owned by Fuchsia Corporation (95%} and Marta (5%). Magenta is liquidated in the current year, pursuant to a plan of liquidation adopted earlier in the year. In the liquidation, Magenta distributes various assets worth $950,000 (basis of $620,000) to Fuchsia (basis of $?00,000 in Magenta stock) and a parcel ofland worth $50,000 {basis of $36,000) to Marta [basis of $30,000 in Magenta stock]. Assume that the § 338 election is not made.

Indicate whether the following are "True" or "False" regarding the tax consequences of the liquidation to Magenta, Fuchsia, and Marta.

a. Magenta recognizes no gain or loss on the dishihu?on of assets to Fuchsia.

b. Fuchsia recognizes no gain or loss in ?le liquidation.

3. Marta recognizes a $20,000 gain in the liquidation.

4. Magenta's loss realized on the land distribution to Marta is recognized.

Reference no: EM133208325

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