Problem
W Corp. owns 90% of B Corp. The remaining 10% is owned by unrelated parties. In a Sect. 332 qualified liquidation , B Corp. distributes property to W Corp. with a fair market value of $80,000( basis $30,000). B Corp. also distributed property to the minority shareholders with a fair market value of $11,000 (basis $14,000).
I. How much gain or loss does B Corp. recognize?
Due to the fact that this is a qualified liquidation under Section 332, B cor. will not be required to report any loss or gain as result of distribution of property to W corp, w Corp will be judged as to receive a dividend equal to the fair market value of the property or $80,000
II. How much gain or loss do the minority shareholders recognize?
The minority shareholder will be required to record a loss on the property that was distributed to them. 14,000-11,000= $3,000 loss.