Gain or loss may have to be recognized under the acceleration rule in all of the...

Gain or loss may have to be recognized under the acceleration rule in all of the following situations except which one?

A. A sale of 60% of the stock in a subsidiary that purchased property in an intercompany transaction from another group member.

B. A tax-free transfer of land purchased in an intercompany transaction to a partnership.

C. If a corporation takes a substituted basis in property that it purchased in an intercompany transaction from another group member.

D. P, a parent corporation, owns 100% of both S and B. S owns land with basis of $120 and FMV of 150%

Expert Solution

Ans. :-

The situation under which gain or loss shall not be recognized under acceleration rule is:-

D. P, a parent corporation, owns 100% of both S and B. S owns land with basis of $120 and FMV of 150%

Explanation :-

A. A sale of 60% of the stock in a subsidiary that purchased property in an intercompany transaction from another group member :-

As in this transaction, the subsidiary company, 60% of the stock of which is sold shall cease to be a member of that group corporation; Acceleration rule shall be applicable to this transaction.

B. A tax-free transfer of land purchased in an intercompany transaction to a partnership :-

As in this transaction, the basis of the property of a member company would be reflected in the property of the non member company, it would attract the Acceleration rule.

C. If a corporation takes a substituted basis in property that it purchased in an intercompany transaction from another group member:-

This transaction involves deferred intercompany gain/loss, which would trigger the application of the Acceleration rule.

ekkarill92 answered 1 year ago

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