What the gain potential in the stock owned by stone corp

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Problem 1: Stone Corp. purchased 100% of the stock of Pearl Corp. in 1984 for $300,000. Early this year, Pearl was liquidated. Stone Corp. received all of Pearl's assets, which had a basis to Pearl Corp. of $420,000 and a FMV of $440,000. Assume the requirements of §332 were satisfied. Will Stone Corp. recognize any gain as a result of the liquidation?

a. yes.
b. no.

Problem 2:  Refer to question #1 above. Will Pearl Corp. recognize any gain as a result of the liquidation?

a. yes.
b. no.

Problem 3: Refer to question #1 above. The gain potential in the stock owned by Stone Corporation prior to the liquidation is:

a. deferred until a later time.
b. eliminated, i.e., will never be recognized.

Reference no: EM132703474

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