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Chapter 20 Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations
Discussion Questions
1. LO.1 Under what circumstances are losses disallowed to a corporation in liquidation?
2. LO.1 For purposes of the related-party loss limitation within the context of a complete liquidation of a corporation, what is the definition of disqualified property?
3. LO.1 For the built-in loss limitation to apply, the property must have been acquired by the corporation as part of a plan whose principal purpose was to recognize a loss on the property by the liquidating corporation. Explain.
4. LO.1 Explain the tax consequences to a shareholder of a corporation in the process of liquidation under the general rule of § 331.
5. LO.2 Discuss the tax consequences to the parent corporation in a § 332 liquidation of a subsidiary.
6. LO.2 In terms of the rules applying to a § 332 parent-subsidiary liquidation, comment on each of the following:
a. The parent corporation’s ownership interest in the subsidiary.
b. The period of time in which the subsidiary must liquidate.
c. The solvency of the subsidiary.
7. LO.2 A subsidiary corporation is liquidated under § 332. Pursuant to its liquidation, the subsidiary distributed property to a minority shareholder. With respect to this distribution, what are the tax consequences to the subsidiary corporation and to the minority shareholder?
8. LO.2 In general, what are the tax consequences of a § 338 election?
9. LO.2 From the perspective of the parent corporation, contrast the tax consequences of a subsidiary liquidation under the general nonrecognition rules with a subsidiary liquidation that follows a § 338 election.
10. LO.3 Explain why a private letter ruling from the IRS is like an insurance policy for a corporate reorganization.
11. LO.3 How is the four-column template in Concept Summary 20.3 used to determine a shareholder’s basis in the stock received in a corporate restructuring?