Reference no: EM132842388
ABC Corporation ?(ABC?) owns 90% of the single class of stock in Subsidiary Corporation . The other? 10% is owned by Rosie? , an individual.? ABC's basis in its Subsidiary stock is? $ 200,000 and? Rosie's basis is? $90,000. Subsidiary distributes property A having an adjusted basis of? $150,000 and an FMV of? $720,000 to ABC? , and property B with a FMV of ? $80,000 and an adjusted basis of? $60,000 to Rosie in a liquidating distribution. Subsidiary had? $10 million of earnings and profits at the date of liquidation.
Problem 1: What gain or loss must ABC and Rosie recognize on the liquidating distributions??
A. ABC recognizes? $520,000 capital gain and Rosie recognizes a? $10,000 capital loss.
B. ABC recognizes no gain or loss and Rosie recognizes a? $10,000 capital loss.
C. ABC recognizes dividend income of? $720,000 and Rosie recognizes dividend income of? $80,000.
D. Neither ABC nor Rosie recognize any gain or loss.
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