Parent-Subsidiary Liquidation | Corporate Liquidation Distribution | Corporate Income Tax Course
Channel: Farhat Lectures. The # 1 CPA & Accounting Courses
Date: 2019-07-29

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Section 332, an exception to the general rule of § 331, provides that a parent corporation does not recognize gain or loss on a liquidation of a subsidiary. In addition, the subsidiary corporation recognizes neither gain nor loss on liquidating distributions of property to its parent.
The requirements for applying § 332 are: 
• The parent must possess at least 80 percent of the subsidiary’s stock (both voting power and value).
 • All of the subsidiary’s property must be distributed in complete cancellation of all of its stock within the taxable year or within three years from the close of the tax year in which the first distribution occurred.
• The subsidiary must be solvent.


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