332 rules for liquidation of a subsidiary corporation with respect to the recognition of gain or loss by the liquidating corporation. A. The Sec. 336 general liquidation rules require the distributing corporation to recognize any gain or loss when distributing its assets pursuant to a complete liquidation.
What is a 332 distribution?
332 provides tax-free treatment to the corporate shareholder’s gain or loss from the receipt of the subsidiary’s property in liquidation, and Sec. 1504(a)(2) (generally 80% by voting power and value) and the distribution was made in complete cancellation or redemption of all the stock of the liquidating corporation.
What is considered a complete liquidation?
Complete liquidation When a corporation is completely liquidated, it transfers all of its assets to its shareholders—whether the assets are cash or property—and the shareholders assume the corporation’s remaining liabilities.
What is a section 338 election?
Section 338 Elections It’s known as a Section 338 election. Under Sec. 338 of the Internal Revenue Code, a corporate buyer and the target company can jointly elect to treat a stock purchase/sale transaction as an asset purchase/sale transaction for federal income tax purposes.
When does section 332 apply to a Liquidating Corporation?
(b) Section 332 applies only to those cases in which the recipient corporation receives at least partial payment for the stock which it owns in the liquidating corporation. If section 332 is not applicable, see section 165 (g) relative to allowance of losses on worthless securities.
What is nonrecognition of gain or loss under Section 332?
(a) The nonrecognition of gain or loss under section 332 is limited to the receipt of property by a corporation that is the actual owner of stock (in the liquidating corporation) meeting the requirements of section 1504 (a) (2).
When do the amendments to section 334 apply?
“The amendments made by this section [amending this section and section 334 of this title] shall apply to distributions after May 21, 1998 .”
What is the transitional rule for affiliated groups?
“ (iii) Transitional rule for affiliated groups.— The amendment made by subparagraph (A) shall not apply with respect to plans of complete liquidation if the liquidating corporation is a member of an affiliated group of corporations under section 60 (b) (2)]
