Liquidating subsidiary ordinary or capital


14-Oct-2020 19:12

But what if there were a way the buyer could have the best of both worlds?What if a buyer could acquire a target's stock for, giving the buyer the stepped-up basis in the asset it seeks?To the contrary, if you purchase the of

But what if there were a way the buyer could have the best of both worlds?What if a buyer could acquire a target's stock for, giving the buyer the stepped-up basis in the asset it seeks?To the contrary, if you purchase the of $1,000,000.Under Section 1060, you allocate the purchase price among the acquired hard assets, and any amount you paid in excess of the value of the hard assets is allocated to intangible assets like goodwill.It can be either a C or S corporation, but that's it. But not any old corporation will do; rather, a Section 338(h)(10) election is limited to the stock purchase of three specific types of corporate targets, all of which have something in common. A corporation that is a subsidiary in a consolidated group. As we'll see shortly, when a Section 338(h)(10) election is made, there are two steps to the transaction: First, the target corporation is treated as having sold all of its assets in a taxable transaction.Under Section 1504, this requires that the subsidiary's stock be owned at least 80% by other members of the group. A corporation that is a subsidiary in a group that is to file a consolidated return, but chooses not to. Then, however, the target corporation is deemed to liquidate and go out of existence, a matter we'll discuss in great detail. When a corporate subsidiary liquidates into a parent that owns 80% of the subsidiary's stock, the liquidation is governed by Sections 332 and 337, which provide that the subsidiary recognizes no gain or loss on the distribution of all of its assets to its parent corporation. Sections 332 and 337 also apply when a corporate subsidiary liquidates into it's corporate parent -- provided the parent owned 80% of the subsidiary's stock -- even if no consolidated return is filed. Under Section 1367(a)(1), when an S corporation target recognizes gain on the deemed asset sale, that gain increases the stock basis of its shareholders.If you purchase the target's stock, under Section 1012 you will take a $1 million basis in that .And while that sounds nice, because stock has an indefinite useful life, it is neither depreciable nor amortizable.

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But what if there were a way the buyer could have the best of both worlds?

What if a buyer could acquire a target's stock for, giving the buyer the stepped-up basis in the asset it seeks?

To the contrary, if you purchase the of $1,000,000.

Under Section 1060, you allocate the purchase price among the acquired hard assets, and any amount you paid in excess of the value of the hard assets is allocated to intangible assets like goodwill.

It can be either a C or S corporation, but that's it. But not any old corporation will do; rather, a Section 338(h)(10) election is limited to the stock purchase of three specific types of corporate targets, all of which have something in common. A corporation that is a subsidiary in a consolidated group. As we'll see shortly, when a Section 338(h)(10) election is made, there are two steps to the transaction: First, the target corporation is treated as having sold all of its assets in a taxable transaction.

,000,000.Under Section 1060, you allocate the purchase price among the acquired hard assets, and any amount you paid in excess of the value of the hard assets is allocated to intangible assets like goodwill.It can be either a C or S corporation, but that's it. But not any old corporation will do; rather, a Section 338(h)(10) election is limited to the stock purchase of three specific types of corporate targets, all of which have something in common. A corporation that is a subsidiary in a consolidated group. As we'll see shortly, when a Section 338(h)(10) election is made, there are two steps to the transaction: First, the target corporation is treated as having sold all of its assets in a taxable transaction.Under Section 1504, this requires that the subsidiary's stock be owned at least 80% by other members of the group. A corporation that is a subsidiary in a group that is to file a consolidated return, but chooses not to. Then, however, the target corporation is deemed to liquidate and go out of existence, a matter we'll discuss in great detail. When a corporate subsidiary liquidates into a parent that owns 80% of the subsidiary's stock, the liquidation is governed by Sections 332 and 337, which provide that the subsidiary recognizes no gain or loss on the distribution of all of its assets to its parent corporation. Sections 332 and 337 also apply when a corporate subsidiary liquidates into it's corporate parent -- provided the parent owned 80% of the subsidiary's stock -- even if no consolidated return is filed. Under Section 1367(a)(1), when an S corporation target recognizes gain on the deemed asset sale, that gain increases the stock basis of its shareholders.If you purchase the target's stock, under Section 1012 you will take a

But what if there were a way the buyer could have the best of both worlds?What if a buyer could acquire a target's stock for, giving the buyer the stepped-up basis in the asset it seeks?To the contrary, if you purchase the of $1,000,000.Under Section 1060, you allocate the purchase price among the acquired hard assets, and any amount you paid in excess of the value of the hard assets is allocated to intangible assets like goodwill.It can be either a C or S corporation, but that's it. But not any old corporation will do; rather, a Section 338(h)(10) election is limited to the stock purchase of three specific types of corporate targets, all of which have something in common. A corporation that is a subsidiary in a consolidated group. As we'll see shortly, when a Section 338(h)(10) election is made, there are two steps to the transaction: First, the target corporation is treated as having sold all of its assets in a taxable transaction.Under Section 1504, this requires that the subsidiary's stock be owned at least 80% by other members of the group. A corporation that is a subsidiary in a group that is to file a consolidated return, but chooses not to. Then, however, the target corporation is deemed to liquidate and go out of existence, a matter we'll discuss in great detail. When a corporate subsidiary liquidates into a parent that owns 80% of the subsidiary's stock, the liquidation is governed by Sections 332 and 337, which provide that the subsidiary recognizes no gain or loss on the distribution of all of its assets to its parent corporation. Sections 332 and 337 also apply when a corporate subsidiary liquidates into it's corporate parent -- provided the parent owned 80% of the subsidiary's stock -- even if no consolidated return is filed. Under Section 1367(a)(1), when an S corporation target recognizes gain on the deemed asset sale, that gain increases the stock basis of its shareholders.If you purchase the target's stock, under Section 1012 you will take a $1 million basis in that .And while that sounds nice, because stock has an indefinite useful life, it is neither depreciable nor amortizable.

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But what if there were a way the buyer could have the best of both worlds?

What if a buyer could acquire a target's stock for, giving the buyer the stepped-up basis in the asset it seeks?

To the contrary, if you purchase the of $1,000,000.

Under Section 1060, you allocate the purchase price among the acquired hard assets, and any amount you paid in excess of the value of the hard assets is allocated to intangible assets like goodwill.

It can be either a C or S corporation, but that's it. But not any old corporation will do; rather, a Section 338(h)(10) election is limited to the stock purchase of three specific types of corporate targets, all of which have something in common. A corporation that is a subsidiary in a consolidated group. As we'll see shortly, when a Section 338(h)(10) election is made, there are two steps to the transaction: First, the target corporation is treated as having sold all of its assets in a taxable transaction.

million basis in that .And while that sounds nice, because stock has an indefinite useful life, it is neither depreciable nor amortizable.

liquidating subsidiary ordinary or capital-35

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The surrendering company must consent in writing that they allow the claim.

Thus, you simply retain the

The surrendering company must consent in writing that they allow the claim.

Thus, you simply retain the $1 million basis in the stock until you eventually sell the shares, at which point the basis will be available to offset the sales proceeds. When you purchase the stock, nothing changes the target.

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The surrendering company must consent in writing that they allow the claim.Thus, you simply retain the $1 million basis in the stock until you eventually sell the shares, at which point the basis will be available to offset the sales proceeds. When you purchase the stock, nothing changes the target.

million basis in the stock until you eventually sell the shares, at which point the basis will be available to offset the sales proceeds. When you purchase the stock, nothing changes the target.