Home
Search
Gallery
Blog
Dictionary
Textbooks
Resource Library
Flashcards
Latest Topics
Ask a Question
Home
Take a Tour
Study Tips
Help Pages
Contact Us
Gallery
Recently Added
Search
Blog
Dictionary
Add New Word
Random Term
Recent Changes
Resource Library
Share Your Resources
Recently Added
Search
Ask a Question
Log In
Sign Up
homework help
portal
Q & A Board
Gallery
Notes and Downloads
This Board
Research Articles
Entire Website using Google
Forum
Search
Advanced Search
Image Gallery
Resource Library
Browse by
Textbooks
Chat
Subjects
Recent
Posts
•
Latest Topics
•
Unanswered Questions
Top Posters
Since Sunday
12
s
5
t
5
s
5
9
5
g
5
h
5
l
5
o
5
f
5
d
5
r
4
Home
Q & A Board
Other Fields Homework Help
Business
Accounting
Print
New Topic
Parent Corporation, which operates an electric utility, created a 100%-owned corporation, Subsidiary ...
safezone
safezone
wrote...
Go to Answer
Posts:
782
Rep:
67
0
6 years ago
6 years ago
Parent Corporation, which operates an electric utility, created a 100%-owned corporation, Subsidiary ...
Parent Corporation, which operates an electric utility, created a 100%-owned corporation, Subsidiary that built and managed an office building. Assume the two corporations have filed separate tax returns for a number of years. The utility occupied two floors of the office building, and Subsidiary offered the other ten floors for lease. Only 25% of the total rental space was leased because of the high crime rate in the area surrounding the building. Rental income was insufficient to cover the mortgage payments, and Subsidiary filed for bankruptcy because of the poor prospects. Subsidiary's assets were taken over by the mortgage lender. Parent lost its entire $500,000 investment. At the time Subsidiary was liquidated, another $100,000 of debts remained unpaid for the general creditors, which included a $35,000 account payable to Parent. What tax issues should Parent and Subsidiary consider with respect to the bankruptcy and liquidation of Subsidiary?
Textbook
Prentice Hall's Federal Taxation 2014 Corporations, Partnerships, Estates & Trusts
Edition:
27
th
Authors:
Anderson, Pope, Rupert
Read 66 times
1
Reply
Report
That's not
philosophy
, it's
geometry
Replies
Answer verified by a
subject expert
strwbrry
strwbrry
wrote...
#1
Answer Link
Top Poster
Posts:
541
Rep:
15
0
6 years ago
6 years ago
Sign in
or
Sign up
in seconds to unlock everything for free
Login with Facebook
Login with Google
Login with Twitter
More solutions for this book are
available here
The managements of Parent and Subsidiary should consider the following tax issues:
• What gain or loss does Parent Corporation recognize on the transfer of its remaining property to the mortgage lender?
• Does Subsidiary Corporation have to recognize cancellation of indebtedness income from not having repaid its debts?
• Does Subsidiary Corporation have to file a corporate tax return for the portion of the final tax year that it is in existence? If so, what income and expenses are included in the return?
• Can Subsidiary Corporation deduct the liquidation expenses on its final tax return?
• What is the amount and character of the loss that Parent Corporation recognizes upon surrendering its Subsidiary stock? Upon not being repaid for the open account indebtedness?
• What happens to Subsidiary Corporation's tax attributes?
Because Parent Corporation received nothing for its investment in Subsidiary Corporation, it can claim a worthless security loss for the $500,000 investment. This loss should be an ordinary loss under Sec. 165(g)(3). Subsidiary's $35,000 debt to Parent should be deductible as a bad debt under Sec. 166. Because corporations do not have a distinction between business and nonbusiness debts, Subsidiary can claim an ordinary loss deduction for the bad debt in its final tax return.
This verified answer contains over 220 words.
1
Report
Every man, wherever he goes, is encompassed by a cloud of comforting convictions, which move with him like flies on a summer day.
--Bertrand Russell, 1950
Related Topics
Solved
A subsidiary corporation filing a consolidated return with its parent corporation must change its ...
Solved
Parent Corporation owns 100% of the single class of stock of Subsidiary Corporation. Parent's basis ...
Solved
Parent Corporation for ten years has owned all of the stock of Subsidiary Corporation, which ...
Solved
Prime Corporation liquidates its 85%-owned subsidiary Bass Corporation under the provisions of Secs. ...
Solved
Gofer Corporation, an S corporation, is owned equally by Mahmoud and Kwame. The corporation had ...
Solved
Caravan Corporation has always been an S corporation. Caravan Corporation is 100%owned by Alan ...
Solved
Bell Corporation, a domestic corporation, sells jars to its wholly owned foreign subsidiary, Jam. ...
Solved
A U.S.-based multinational corporation has 100% owned subsidiary in Argentina. The subsidiary ...
Show More
safezone
Author
wrote...
6 years ago
This site is awesome
jodie1
wrote...
Yesterday
Thanks
oscar520000
wrote...
2 hours ago
Thanks
New Topic
Quick Reply
[center][color=gray]Please [b]login or register[/b] to leave a reply[/color][/center]
Explore
Post your homework questions and get free online help from our incredible volunteers
310 People Browsing
234 Signed Up Today
Start New Topic
Take the Tour
Study Tips
Study Tools
New
Topics Trending
Browse by Textbook
Related Images
278
58
1
Your Opinion
What's your favorite math subject?
Algebra
Calculus
Trigonometry
Geometry
Statistics and Probability
Logic and Proofs
Other
Votes: 184
Previous poll results:
Do you trust social media networks with protecting your privacy?
Latest Blogs
The Secrets of Longevity: Exploring Okinawa, Japan
Unusual Plant Defenses
A link between depression and heart disease
3D Imaging: A Practical Use of Mathematics
How to cut in front of a line (persuasion tactic)
Ready to ask a question on
Biology Forums
?
Try it out
What is the maturity value of $17,000 invested at 5.0% compounded quarterly for five years?
-
Mathematics
Your friend borrowed money from you nine months ago. If they pay you $2,550 today, how much did they ...
-
Mathematics
You wished to start a new business and attended the Small Business Bank. You borrowed $10,000 for 4 ...
-
Mathematics
Mrs. Landry placed $14,500 in a four-year compound interest GIC earning 2.75% compounded monthly. ...
-
Mathematics
Scheduled payments of $2,000 due today and $4,000 due in nine months are to be replaced by two ...
-
Mathematics
What principal earning 16% compounded quarterly will grow to $8500 after six years and three months?
-
Mathematics
Can you identify which chordates belong to each clade?
-
General Biology
To the nearest dollar, what was the issue price of a 25-year strip bond with a face value of $50,000 ...
-
Mathematics
Draw a possible curve for population after several generations if the population has stabilizing ...
-
General Biology
In order to pay off a debt that he took out today, Roger will have to make a payment of $3,500 in 15 ...
-
Mathematics
Loading...