Corporate Tax Liquidation Checklists

Summary

El video ofrece una visión detallada de las liquidaciones completas de una corporación y sus implicaciones fiscales. Se discute la importancia de distinguir entre liquidaciones completas y otras formas de distribución de activos, como las liquidaciones parciales o las operaciones normales de la empresa. Se destaca la necesidad de verificar si se cumple con la definición de liquidación completa según la sección 346 de la ley fiscal. Se abordan dos conjuntos de listas de verificación: la regla general y la regla especial de no reconocimiento, que se aplica en el caso de la liquidación de una subsidiaria por parte de una corporación matriz. Se explica cómo se calculan las ganancias o pérdidas reconocidas tanto por la corporación como por los accionistas, y cómo se determina la naturaleza de dichas ganancias o pérdidas. Además, se menciona la disolución de los beneficios por pérdidas y la transferencia de atributos fiscales en caso de liquidación. El video concluye con una llamada a la práctica de los problemas para un entendimiento más profundo del tema.

Takeaways

• 📚 **Liquidación Corporativa Completa**: Se define en la sección 346 de la ley fiscal y es diferente a las liquidaciones parciales o distribuciones normales.
• 🔍 **Plan de Liquidación Formal**: Es necesario para documentar la intención de liquidación de la corporación y cómo se realizarán las distribuciones.
• 🤝 **Relación Accionista-Corporación**: La naturaleza de los accionistas (corporativos o individuales) influye en las reglas de liquidación que se aplicarán.
• 📈 **Ganancia o Pérdida del Accionista**: Se calcula según la sección 331, restando el basis ajustado de la cantidad recibida.
• 💰 **Carácter de la Ganancia o Pérdida**: Normalmente se trata de un activo de capital, y si la acción ha sido mantenida por más de un año, será una ganancia a largo plazo.
• 🏢 **Consecuencias para la Corporación**: Bajo la regla general (sección 336), la corporación tratará la liquidación como una venta al valor de mercado.
• 🚫 **Perdidas no Reconocidas**: Si hay una liquidación y se involucran partes relacionadas, las pérdidas pueden no ser reconocidas debido a la sección 267.
• 🔄 **Tratamiento Especial para Liquidaciones**: En el caso de una liquidación de una subsidiaria por parte de una corporación matriz, se aplica la regla de no reconocimiento de ganancia o pérdida.
• ✅ **Relación Padre-Hijo**: Se requiere para la aplicación de la regla especial, donde el padre debe tener el control (80% o más) de la subsidiaria.
• 📝 **Bases para Activos Recibidos**: Los accionistas recibirán activos a su valor de mercado, sin considerar las obligaciones.
• 🌐 **Efectos en el Patrimonio Neto**: Toda la EMP (Monto de Espera de Pérdida) se disuelve en una liquidación completa.
• ➡️ **Carácter de la Ganancia Reconocida**: La naturaleza de la ganancia o pérdida dependerá del tipo de activo que la corporación esté vendiendo o distribuyendo.

Q & A

¿Qué es una liquidación completa de una corporación?

Una liquidación completa de una corporación es un proceso definido en la sección 346 de la ley fiscal, donde la corporación se disuelve completamente y se distribuyen sus activos a los accionistas.

¿Qué es la diferencia entre una liquidación parcial y una liquidación completa?

Una liquidación parcial implica la venta de activos o la distribución de propiedades sin disolver la corporación, mientras que una liquidación completa conduce a la disolución de la corporación y la distribución de todos sus activos.

¿Por qué es importante determinar si hay un plan formal de liquidación?

Un plan formal de liquidación es crucial ya que define cómo se llevará a cabo la distribución de propiedades y cómo esto afectará a las consecuencias fiscales tanto para la corporación como para los accionistas.

¿Cuál es la diferencia entre el tratamiento fiscal de un accionista corporativo y uno individual en una liquidación completa?

Un accionista corporativo podría beneficiarse de la Regla de No Reconocimiento Especial si la transacción cumple con los requisitos de una liquidación completa, lo que podría diferir del tratamiento fiscal que recibiría un accionista individual.

¿Cómo se calcula la ganancia o pérdida que un accionista reconoce en una liquidación completa?

La ganancia o pérdida que un accionista reconoce se calcula mediante la fórmula del monto recibido menos la base ajustada de las acciones que el accionista tiene en la corporación, según la Sección 331.

¿Cuál es la base que un accionista toma en una propiedad distribuida en una liquidación completa?

El accionista toma como base la valoración justa de mercado de la propiedad distribuida, sin tener en cuenta cualquier responsabilidad, según la Sección 334.

¿Qué ocurre con las EMP (Elección para el Tratamiento de la Participación Mayor) en una liquidación completa?

Todas las EMP se disuelven en una liquidación completa, lo que significa que desaparecen y no tienen efectos fiscales posteriores.

¿Cómo se determina si una transacción se considera una liquidación de subsidiaria bajo la Regla Especial?

Una transacción se considera una liquidación de subsidiaria si hay una relación padre-hijo, donde el padre corporativo posee el 80% o más del poder de voto total y de todas las acciones emitidas por la subsidiaria.

null

null

¿Qué sucede con las pérdidas en una liquidación de subsidiaria si hay partes relacionadas?

Si hay partes relacionadas y se genera una pérdida en la liquidación de una subsidiaria, esta pérdida no puede ser reconocida debido a la Regla de Personas Relacionadas (Sección 267).

¿Cuáles son las consecuencias fiscales para el accionista minoritario en una liquidación de subsidiaria?

El accionista minoritario debe reconocer cualquier ganancia o pérdida según las reglas generales de liquidación completa, utilizando el monto recibido menos la base de sus acciones en la subsidiaria.

¿Cómo se calcula la ganancia o pérdida para la subsidiaria en una liquidación de subsidiaria?

La subsidiaria reconoce ganancia o pérdida con respecto a la parte de la transacción con el accionista minoritario, pero no reconoce pérdidas con respecto a la parte de la transacción con el padre corporativo.

¿Qué atributos fiscales se transfieren en una liquidación de subsidiaria bajo la Regla Especial?

En una liquidación de subsidiaria bajo la Regla Especial, los atributos fiscales como las Pérdidas No Diferidas (NOL) y las EMP se transfieren del subsidiario al padre corporativo.

Outlines

00:00

📚 Introducción a la liquidación completa de sociedades

Este primer párrafo introduce el tema de la liquidación completa de sociedades y su importancia en el contexto del ciclo de vida de una corporación. Se destaca la necesidad de determinar si se trata de una liquidación completa según la sección 346 de la legislación fiscal. Además, se menciona la importancia de un plan formal de liquidación que incluya la distribución de propiedades y su impacto en las consecuencias fiscales para la corporación y sus accionistas. Se destaca la distinción entre liquidación completa y otras formas de distribución o operaciones normales de la empresa.

05:04

🏛 Reglas generales y consecuencias para accionistas y corporaciones

En el segundo párrafo se abordan las reglas generales que rigen las liquidaciones completas y sus efectos sobre los accionistas y las corporaciones. Se describe el cálculo de la ganancia o pérdida reconocida por los accionistas según la sección 331, teniendo en cuenta el valor recibido, el basis ajustado y las posibles ganancias o pérdidas a largo plazo. Además, se explica el impacto sobre la corporación, incluyendo el cálculo de la ganancia o pérdida y la resolución de pasivos, así como las excepciones y reglas especiales relacionadas con las partes relacionadas y la no reconocimiento de pérdidas en ciertos casos.

10:05

🔄 Regla especial de no reconocimiento en liquidaciones

Este párrafo se enfoca en la regla especial de no reconocimiento que se aplica en casos de liquidación de subsidiarias. Se menciona la sección 332 y 337 y cómo estas reglas permiten diferir la ganancia o pérdida cuando una corporación matriz liquida una subsidiaria en las que tiene un control del 80% o más. Se aclara que ninguna ganancia o pérdida se reconoce para la matriz o la subsidiaria en la transacción, pero los accionistas minoritarios sí reconocen ganancia o pérdida. Se discuten las implicaciones de las EMP y las pérdidas no operativas (NOLs) y cómo se transfieren en caso de cumplimiento de los requisitos.

15:06

🤝 Consecuencias para los accionistas minoritarios y la subsidiaria liquidada

El cuarto y último párrafo explora las consecuencias fiscales para los accionistas minoritarios y la subsidiaria en proceso de liquidación. Se indica que los accionistas minoritarios sí reconocerán ganancia o pérdida según las reglas generales, mientras que la subsidiaria reconocerá ganancia pero no pérdida debido a la regla de prevención de abuso. Se resume cómo se determina el carácter de la ganancia o pérdida y se hace hincapié en la importancia de la práctica y la comprensión de estos conceptos complejos.

Keywords

💡Liquidación Corporativa Completa

La liquidación corporativa completa es un proceso por el cual una empresa cesa sus operaciones y distribuye sus activos a los accionistas. En el video, se discute cómo este proceso impacta en la tributación tanto de la empresa como de los accionistas, y se destaca su diferencia con otras formas de liquidación o distribución de activos.

💡Sección 346

La Sección 346 es una referencia a la ley tributaria que define una liquidación corporativa completa. Es crucial para determinar si se aplica el conjunto de reglas tributarias asociadas con dicha liquidación, como se menciona en el video al principio del análisis de las consecuencias tributarias.

💡Plan de Liquidación

Un plan de liquidación es un documento formal que describe cómo la empresa planea llevar a cabo la liquidación, incluyendo la distribución de propiedades. En el video, se destaca la importancia de este plan para entender las implicaciones tributarias de la liquidación.

💡Reglas Generales y Especiales

El video describe dos conjuntos de reglas para abordar las consecuencias tributarias de una liquidación: las reglas generales y las reglas especiales. Las reglas generales se aplican a los accionistas y la empresa, mientras que las reglas especiales pueden aplicarse en casos específicos, como la liquidación de una subsidiaria por parte de una corporación matriz.

💡No Reconocimiento de Ganancia o Pérdida

En el contexto de una liquidación de subsidiaria por parte de una corporación matriz, se aplica una regla especial de no reconocimiento de ganancia o pérdida. Esto significa que ni la matriz ni la subsidiaria reconocen ganancias o pérdidas en la transacción, lo que se discute en detalle en el video.

💡Relación Matriz-Subsidiaria

La relación entre una corporación matriz y su subsidiaria es fundamental para determinar si se aplican las reglas especiales de liquidación. Se requiere que la matriz posea el 80% o más del poder de voto y de todas las acciones emitidas de la subsidiaria, como se indica en la parte del video que trata sobre las reglas especiales.

💡EMP (Pérdidas no Compensadas por el Trabajo)

EMP se refiere a las pérdidas que una empresa no ha podido compensar con sus ganancias. En una liquidación corporativa completa bajo la regla general, todas las EMP se disuelven y desaparecen, como se menciona en la sección del video que trata sobre las consecuencias para la empresa.

💡Sección 331 y 334

Las Secciones 331 y 334 son referencias a la ley tributaria que determinan cómo se calcula la ganancia o pérdida reconocida por los accionistas y la base para el activo recibido en una liquidación. En el video, se usan estas secciones para ilustrar cómo se determinan estas cantidades.

💡Activo no Compensado por el Trabajo (NOL)

Un NOL es una pérdida que una empresa puede carryforward (traer adelante) a años fiscales futuros para reducir su carga tributaria. En el video, se discute cómo los NOL de una subsidiaria se transfieren a la corporación matriz en una liquidación de subsidiaria.

💡Anti-Abuso

Las reglas de anti-abuso, como la Sección 267, evitan que las empresas o los grupos relacionados reconozcan pérdidas en ciertas transacciones. En el video, se menciona que la subsidiaria no puede reconocer una pérdida en la liquidación con un accionista minoritario, lo que se debe a estas reglas.

💡Reconocimiento de Ganancia o Pérdida

El reconocimiento de ganancia o pérdida se refiere a cuando una empresa o un accionista debe declarar una ganancia o una pérdida fiscal para un activo. En el video, se discute cómo se determina el reconocimiento de ganancias o pérdidas en diferentes escenarios de liquidación, tanto en la regla general como en la regla especial.

Highlights

The video discusses the tax implications of complete corporate liquidations, which are different from partial liquidations, redemptions or normal distributions.

A complete liquidation is defined under tax law in Section 346. It is important to verify if a liquidation qualifies as complete before applying specific rules.

If a formal plan exists stating the corporation's intent to liquidate and distribute property, it is relevant to the complete liquidation.

Different checklists apply depending if the shareholder is an individual or a corporation, due to the potential for a non-recognition rule in certain cases.

Under the general rule, shareholders realize and recognize gain or loss on the distribution based on the amount realized minus adjusted basis.

The character of the gain or loss to shareholders is typically capital gain or loss, unless the shareholder is a dealer in securities.

Shareholders receiving property other than cash take a basis in the property equal to its fair market value under Section 334.

For the corporation, the general rule under Section 336 treats the liquidation as if the corporation sold its assets at fair market value.

If there are liabilities on the property being distributed, the corporation gets relief equal to the greater of the FMV or the liabilities.

Related party losses may not be recognized if the distribution is not pro rata and involves disqualified property under Section 267.

The character of any gain or loss recognized by the corporation depends on the specific asset being distributed.

In a complete liquidation under the general rule, all earnings and profits (E&P) of the corporation are dissolved.

The special rule under Sections 332 and 337 provides mandatory non-recognition treatment for liquidations of subsidiary corporations by parent corporations.

For the parent corporation, there is no gain or loss recognized in a Section 332 liquidation. The basis of any property received is a carryover basis.

Any NOLs and E&P of the subsidiary roll over to the parent corporation in a Section 332 liquidation.

A minority shareholder recognizes gain or loss on the distribution based on the general rules, using the amount realized minus adjusted basis in their stock.

The liquidating subsidiary recognizes gain but not loss on the transaction with the minority shareholder under Section 336.

The character of any gain recognized by the liquidating subsidiary depends on the specific asset transferred to the minority shareholder.

Transcripts

hello in this video we're gonna look at

corporate tax complete liquidations now

whenever we have to deal with corporate

taxation remember that it helps

tremendously to look at where we are in

the lifecycle of the corporation

we started in other videos talking about

corporate formation and contribution we

also talked about capital financing

specifically debt per sec WA t issues

then we talked about normal operations

distributions and redemptions which

happened during the normal operations of

the business finally when the

corporation is going to wind up

operations if they do we have complete

liquidations now it's important to note

that complete liquidations are not the

same topic as partial liquidation

redemptions or a normal distribution

that happens during the normal

operations of the business so this

checklist is meant to help you go

through the consequences of a complete

corporate liquidation so the first

question do we actually have a section

346 complete liquidation so this is

something defined under the tax law in

section 346 and under the regulations

okay so you need to make sure you

specifically have a complete liquidation

now if you're taking me for a class I'm

going to make it specific whether it's a

complete liquidation or not but you

might have another teacher where you

have to figure this out of course in

practice it's very important we look at

the regs the revenue rulings whatnot

just note that unless you have a

complete liquidation you do not have

only when you have completed a ssin do

you apply these checklist these specific

rules for liquidations so the second

question is once we have a complete

liquidation is there a formal plan

stating the corporation's plan to

liquidate including distributing

property if so that has to do with the

complete liquidation plan and exactly

how exactly the distributions as a

result of elation how they play out

which is going to have an effect on the

corporate and the shareholders and

determining tax consequences next is a

shareholder or corporation or individual

the reason why that's important is

because you're going to see that we have

to complete liquidation sets of

checklists we have the general rule and

then we have the specialist

City area liquidation non-recognition

rule we'll talk more about that but just

note that if you have a corporate

shareholder you might be able to get

that special rule non-recognition for if

the transaction qualifies as a complete

limitation so again we talked about if

it's not a complete elimination you

don't apply these checklists if it does

we continue with the checklist that

you're gonna see below again the two

sets if it's not a completely complete

elimination but there's a distribution

then we're going to look at distribution

checklist under section 301 or if it's a

Redemption we look at section 302

checklists for redemptions but again

these checklists focus on complete

liquidation the corporation has a plan

in place and under Section 3 446 will be

liquidating okay

so once you've determined with a

complete liquidation we now we're going

to look at the two sets of checklists

when we're looking at the checklist it's

important to remember we're gonna focus

on the corporate consequences or the

corporation's consequences and the

shareholders consequences let's start

with a general rule so this is the

general rule and within the general rule

we're gonna look at the shareholder

first okay so we're looking at the

consequences of the shareholder under

the general rule the first thing is how

much gain are lost

does the shareholder realize and

recognize so under Section 331 what

we're going to do is we're going to

apply the normal section 1001 amount

realized minus adjusted basis the amount

realized is the amount that the

shareholders receiving using the normal

amount realized formula right actual

cash receipt plus constructive cash

received plus non-cash property minus

selling expenses the adjusted basis this

is important is gonna be the adjusted

basis in the stop that that shareholder

has in the corporation that's important

that's where some students when they're

learning this topic or in practice God

keep straight that's where things get

kind of confusing because you're gonna

see when we look at the the consequences

of corporation we use the adjusted basis

of the property being distributed with

respect to the corporation okay so that

gives us to realize that recognize gain

or loss under the general rule there's

no

recognition so the realized gain or loss

will be recognized second question

what's the character of the gain or loss

so the shareholder has stock and a

corporation so almost always it's gonna

be a capital asset under Section 12 21

because it's gonna be an investment

property unless it's a dealer or broker

and securities and then o be treated as

inventory and therefore ordinary income

but almost all shareholders will be tree

as a capital asset under Section 12 21

and therefore capital gain or loss if

the stock is held for more than a year

long term your last short term okay the

next issue if the shareholders receiving

property other than cash which we know

cash always takes the basis of the face

value what is the basis that the

shareholder takes so let's say the

corporation distributes in complete

liquidation some land to a shareholder

we go through again the amount realized

the fair market value of the land

there's no liabilities we don't worry

about that - the adjusted basis okay in

the in the stock given up that gives us

our realize and recognize gain it's

going to be a capital let's say it's

been held for more than a year long-term

capital gain so the next question is

what's the basis the shareholder takes

in the land this is always going to be

fair market value fair market value

under Section 334 okay fair market value

without regard to any liabilities so

there's any liabilities on the land even

if the liabilities exceeds the fair

market value the basis is always going

to be fair market value fair market

value okay so those are the consequences

to the shareholder what about the

consequences to the corporation under

the general rule the general complete

liquidation rules okay the first

question how much gain or loss is the

corporation realized and recognized all

right so the general rule for the

general rule you know it's getting a

little it's just like the tax bill right

we have this general rule the exception

to the general rule all that stuff the

general rule is found under section 336

and it's going to be as if the

corporation was selling it using fair

market value okay fair market value all

right unless there's liabilities we'll

talk about that in a moment so it's

going to be a mount real

- adjust the basis the amount realized

is going to be looking at fair market

value and the liability it's going to be

the greater of the fair market value or

the liability attached that the

shareholder is going to take that the

corporation has relief okay so liability

relief now the adjusted basis used in

this calculation is gonna be the

adjusted basis of the property so this

says adjust the basis of the stock this

should be adjust the basis of the

property okay my apologies that should

be probably see I caught myself there

you gotta be careful the adjusted basis

of the property not the stock the stock

was used with a shareholder property is

used for the property that the

Corporations giving up is used for the

corporation to terminate tax

consequences so the next bullet point

which I just mentioned says that if

there's liabilities of the property

liability relief to the corporation the

rule for amount realized is the greater

of fair market values or the liabilities

liability relief liabilities attached

now there's a special rule here and this

is not the second set of check lists

we'll still talk about that in a moment

the special rule says if there's a loss

here and there's related parties then

the loss cannot be taken okay the loss

may not be recognized the corporation

may not recognize loss emphasis to

section 267 related party okay and the

distribution is not pro rata the

distribution is of disqualified property

all right it's a not it's not a pro rata

distribution okay not pro rata and the

distribution so if everybody gets the

same percentage of stuff right then

that's viewed as a pro rata but if if it

isn't pro rata right everyone's or

people getting different things then

that's when this rule comes into play

also the distribution is of disqualified

property which I have here any property

acquired by section 351 transaction so

or as a contribution to capital during

the five-year period ending on the date

of distribution the related person rules

are found in section 267 so we look at

family members we look at entities all

those different things which I have some

rules here summarized but you can look

at that section 267 okay what about the

character of the gain or loss calculated

the character is going to be

specifically looking at the specific

asset that the corporation holds so

however that corporation held that asset

lets whether it's a section 1231 asset

whether it's a capital asset whatever it

is all right final question what about

the effect of EMP when a complete

liquidation we're under the general rule

all EMP is dissolved all EMP is going to

be dissolved and therefore it's going to

be gone okay all going to be gone

therefore EMP disappears disappears okay

so that is the complete liquidation

general rule checklist now we're going

to take a look at the special rule so

under the special rule which is a non

recognition rule you might recall

non-recognition rules like section 1031

like-kind exchanges section 1033

involuntary conversion even section 351

corporate formation these are all

non-recognition rules where gain or loss

system is going to be deferred now this

is going to be a mandatory

non-recognition rule and the idea here

is a liquidation of a subsidiary so when

we have a liquidation of a subsidiary

Congress basically says you know what it

makes sense under the number of

condition themes of liquidity issues and

economics efficiency issues for the

normal condition rule to apply so these

are found in section 332 and 337 332 the

actual number condition rule 337 is the

basis corresponding basis rule that

defers the gain or loss provides that

neither the parent shareholder nor the

liquidating subsidiary okay those are

important so neither the parent

shareholder nor the liquidating

subsidiary recognizes gain or loss so

the idea here is that we have

corporation a parent corporation

that owns of subsidiary corporation

alright and it controls which remember

control is viewed as 80% or more 80% or

more right greater than or equal to 80

percent if we have a liquidation of the

subsidiary we're no longer will exists

and it's gonna roll up into the parent

no gain or loss will be recognized by

the parent or the subsidiary on the

transaction now an interesting issue

though happens what if you have a parent

corporation and you have another

shareholder minority shareholder well

the minority shareholder that will still

have to recognize gain and then the

subsidiary you have to recognize gain

with respect to the minority shareholder

okay so if we have a minority

shareholder whether it's an individual

or parent let's say they own 20% or less

that one does have to recognize gain or

loss that one does that transaction so

what we do is we actually view the gain

or loss on that part but not this part

this part goes unrecognized not

recognized and deferred okay so going

through the checklists the first

question is their complete liquidation

pursuant to the requirements of section

332 B so we need that complete

liquidation as we talked about we've

already actually looked about that

looked at that we looked at section 346

complete liquidation the next question

is there a parent-subsidiary

relationship so parents of city

relationship we just talked about that

the idea is that a parent corporation

owns a subsidiary corporation

specifically 80 percent or more of total

voting power and all outstanding stock

requirements okay of all so you need

both of those okay you need 80 percent

or more of voting 80 percent or more of

all outstanding stock okay just so you

know now certain non-voting preferred

stock has ignored okay

I don't really test on the non-voting

preferred but some faculty members do

some professors do and of course in

practice you have to worry about it so I

would just focus on common but remember

it's all voting and all classes of stock

as well so if you have non-voting a

voting common number three has a

complete liquidation Ben

opted so again we have to look at the

complete elimination plan and we do have

a complete liquidation then we have to

continue with the plan we've been

currently already focusing on that the

reason I key in on that is sometimes

with a parent subsidiary there's special

relationships relationships with what

exactly is going on and there's special

rules under 332 if we meet those

requirements then we have section 332

and again section 332

is going to be we have the special

checklist which are below if not we

apply the normal general rules for

complete liquidation all right so the

liquidation of a subsidiary the parent

corporation tax consequences so if we

have section 332 there's going to be no

gain or loss to the parent corporation

that's under Section 332 okay no gain or

loss to the parent corporation what's

the basis of any property received by

the parent corporation that's gonna be a

transfer basis and tacked holding period

all tacking so we get to roll over the

basis from the subsidiary to the parent

and we get all tacking additional

considerations EMP as well as any NOLs

they roll over okay these all roll over

there's other tax attributes that roll

over but the main ones are any NOLs of

the subsidiary head as well as EMP EMP

now by the way if this is 100% it's the

full amount but if it's 80% let's say or

90% you're going to take the portion of

that okay what about the tax

consequences of the minority shareholder

right so we did an example earlier where

we had parent corporation owns 80

percent of the voting in all classes of

subsidiary corporation and then we had

minority shareholder who's let's say

it's an individual owns 20% so 80

percent here okay we just talked about

the consequences the parent 20% owned by

minority shareholder what about the

consequences of minority shareholder so

to the minority shareholder we apply the

normal general rules any gain or loss

will be recognized applying the same

checklist under the general rules we

just talked about 331 so I'm

realize what's received - adjusted basis

in the stock gives us the realized gain

or loss I'll be recognized by the

minority shareholder what basis is taken

by the property it's going to be the

fair market value basis under 334 again

under the general rules just like we saw

and again EMP that's not an issue that

goes away in that situation all right

the liquidating subsidiary so let's

think about the situation here with the

parent and the subsidiary in minority

and the subsidiary corporation so with

respect to the liquidating subsidiary

how much gain or loss is recognized

so in determining the gain or loss

recognize the consequences need to be

broken up and the idea is that the gain

or loss with respect to this transaction

to the subsidiary will not be recognized

will not be recognized but the gainer

loss on this transaction will be

recognized both to the minority and to

the subsidiary corporation so we have to

break up the transaction so what's the

effect of the complete term complete

liquidation distribution to the parent

with respect to the minority that's

gonna be no gain or loss no gain or loss

so if we have a transaction where it's

just the parent subsidiary parent owns

100% no gain or loss recognize the

parent no gain or loss recognize a

subsidiary but we don't have that we

have we have partial no gain or loss

recognition but then this side we have

gain or loss recognition so the

consequences with respect to breaking it

up to the parent no gain or loss what

about if this subsidiary owes a debt to

its parent then any property that's

subject in a debt as treat as a

distribution subject to the general

non-recognition rules that's with

respect to liabilities and debts what

about the effects that's the one part

that is the parent to the subsidiary and

that's the 80% what about the minority

shareholder to the subsidiary where we

have the

20% 20% so in that and with respect to

that transaction the subsidiary must

recognize the gain or loss under Section

336 since the liquidating subsidiary

corporation so liquidating subsidiary

recognizes gain or loss with respect to

this part so not here but here here it

does so we have to look at the

consequences just with respect to that

transaction so any any assets

transferred to the minority shareholder

you look at any gain or loss with

respect to that however liquid

subsidiary does not recognize a loss

never loss never a loss on the

transaction never lost and that's

because of anti-abuse rule this is very

important so in this transaction only

gain only subsidiary can recognize game

but not lost when your deal with the

minority shareholder never a loss

okay not loss if it's a loss it's going

to be anti-abuse rule on the losses now

can we recognize what's the character of

any gain recognize it's going to be

looking at this specific asset just like

we saw in the other in the general

checklist so we look at this specific

asset all right so that finishes up the

the subsidiary liquidation special rule

and we've completed all the checklists

now for all the different complete

limitations so I hope you've enjoyed

this video now it's important to go

practice some problems