Corporation W owns 100% of the common stock of corporation Z with a basis of $30
ID: 2450526 • Letter: C
Question
Corporation W owns 100% of the common stock of corporation Z with a basis of $300. Z owns a rental building ( its only asset) with a gross fair market value of $3,000, subject to a non-recourse mortgage of $1,200. Z’s adjusted basis for this building is $900. Z has $600 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Z and W do not report on a consolidated basis. Z distributes the building to W in complete liquidation and W sells the building to Corporation V for $1,800 cash, subject to the debt.
a. W recognizes no gain on the liquidation under Section 332.
b. Z has gain on the liquidation under Section 336.
c. W would recognize no gain on the sale to V.
d. All of the above.
E. None of the above.
please explain why you choose this answer.
Explanation / Answer
a. W recognizes no gain on the liquidation under Section 332.