What is the parent’s basis for the assets received

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Reference no: EM13194474

Parent corporation purchased 75% of Subsidiary Corporation in 2000. Subsidiary’s balance sheet shows the following amounts: a)Demand deposit Basis-$20,000 Value-$20,000 b)IBM stock Basis-$30,000 Value-$50,000 c)Parking Lot Basis-$5,000 Value-$30,000 d)Building Basis-$0 Value-$100,000 e)Mortgage Basis-$<15,000> Value-$<15,000> Subsidiary has a net operating loss carryover in 2006 of $7,000 and earnings and profits of $22,000. The Subsidiary redeemed in 2003 the 25% shareholder Roy Rogers. The Subsidiary distributed the IBM stock for his 25% interest. In 2006, Subsidiary adopts a plan of liquidation.

Questions:

1)What are the tax consequences to Roy in 2003 (i.e. realized, recognized gain or loss and character)?

2)Does the Subsidiary recognize gain or loss on the redemption and the Liquidation (i.e. realized, recognized and character)?

3)What is the Parent’s basis for the assets received?

4)What happens to the Subsidiary’s NOL and Earnings and Profits? [Give computations and IRC Secs.]

Reference no: EM13194474

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