B sells its stock to a. b will recognize a capital gain to, Ask an Expert

Accounting

Corporation X is owned in equal shares by Corporations A and B. A and B are otherwise unrelated.

They decide that they want to liquidate X.

Since this is a closely held corporation, there is no readily available objective price for the stock in X.

Corporation A would like to continue to operate X as an integral part of Corporation A.

So, they devise the following plan:

B sells its stock to A. B will recognize a capital gain to the extent of the excess of the proceeds over its basis in its X stock. A will then liquidate X under Section 332 in a tax-free exchange avoiding any gains recognized by X or A.

What do you think?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M969806

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