Question

Sparrow Corp purchased 90% of the stock of Warbler Corp 8 yrs ago for $1M. Sparrow liquidates Warbler and acquires assets with a basis to Warbler of $850K (FMV $1.2M). Sparrow will have a basis in the assets of $850K, and no recognized gain or loss. True or False

Answer 1

True

Step-by-step explanation:

Given that

Sparrow corp purchased 90% of the stock for $1 million at 8 years ago also it purchased the assets of $850K of this the fair market value is $1.2M And there is the basis in the asset of $850K

Since the asset was purchased of $850K and there is the basis of the asset i.e. of $850K

So there is no recognized gain or loss

hence, the given statement is true