What are the amount and character of the gain

Assignment Help Accounting Basics

Reference no: EM13488204

Parent Corporation has owned all 100 shares of Subsidiary Corporation common stock since 2007. Parent has been in the business of manufacturing and selling light fixtures, and Subsidiary has been in the business of manufacturing and selling light bulbs. Amy and Bill are the two equal shareholders of the Parent stock and have owned their stock since 2007. Amy's basis in her 50 Parent shares is $80,000, and Bill's basis in his 50 Parent shares is $60,000. On April 10, 2014, Parents distributes all 100 Subsidiary shares to Bill in exchange for all his Parent shares (which are cancelled). The distribution has a bona fide business purpose. The Subsidiary stock had a $30,000 basis to Parent on the distribution date. At the end of 2014, Parent has $150,000 of E&P. Immediately after the distribution, the FMVs of the Parent and Subsidiary stocks are $3,000 and $1,000 per share, respectively.

a. What are the amount and character of the gain, loss or income Bill must recognize as a result of Parent's distributing the Subsidiary stock?
b. What basis does Bill take in the Subsidiary stock?
c. When does Bill's holding period for the Subsidiary stock begin?
d. Assume instead that Andrew formed Subsidiary in 2010 to manufacture and sell light bulbs. Andrew sold the Subsidiary stock to Parent for cash in 2012. How would your answers to parts a-c change?

Reference no: EM13488204

Questions Cloud

Evaluate the atom density of the zinc : A block of zinc has a density of 7.133 g/cm^3 and atomic weight of 65.39 g. A) Calculate the atom density of the zinc. B) Find the macroscopic thermal neutron absorption cross section for zinc, assuming that microscopic cross section for absorptio..

With what speed does the photon travel : A nucleus moving at 0.6c through the lab decys, emitting a photon in the forward direction. With what speed does the photon travel

Find the mass density inside the box : Suppose that a 1.00 cm3 box in the shape of a cube is perfectly evacuated, except for a single particle of mass 1.15 10-3 g. Find the mass density inside the box

Explain mole fraction of hexane in a pentane-hexane solution : The mole fraction of hexane in a pentane-hexane solution is 0.750. a. Calculate the partial pressures of pentane and hexane in the vapor. b. Calculate the mole fraction of pentane in the vapor in equilibrium at 25° C with this solution.

What are the amount and character of the gain : a. What are the amount and character of the gain, loss or income Bill must recognize as a result of Parent's distributing the Subsidiary stock?

What would be the force exerted on the sail : A possible means of spaceflight is to place a perfectly reflecting aluminized sheet into Earth orbit and use the light from the sun to push this solar sail. what would be the force exerted on the sail

What current is required in the windings : A long solenoid that has 1,050 turns uniformly distributed over a length of 0.450 m produces a magnetic field of magnitude 1.00 10-4 T at its center

Current period accounting records : Presented below is selected information from the Kudlick Company's current period accounting records (in $000s):

Explain how many grams of sodium chloride : An isotonic solution will produce an osmotic pressure of 7.84 atm measured against pure water at human body temperature (37.0 °C). How many grams of sodium chloride must be dissolved in a liter of water to produce an isotonic solution

User Account

All Pages