Reference no: EM132842409

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 Subsidiary recognize on the liquidating distribution??

A. ?$570,000 gain on Property A

B. ?$20,000 gain on Property B and? $570,000 gain on Property A

C. No gain on either Property A or B

D. ?$20,000 gain on Property B