AC430 Unit 10 Corporate Liquidation Problem Example

Course	AC430 Advanced Tax - Corporate
Unit	Unit 10
Paper type	Liquidation problem
Length	About 550 words, 5 pages double-spaced
Format	APA 7 student paper
School	Purdue University Global
Program	BS in Accounting
Updated	October 2026

Free sample paper for AC430 Unit 10

One Distribution, Two Sets of Rules: A Unit 10 Liquidation Problem for an 85 Percent Owned Subsidiary

[Student Name]

Purdue University Global

AC430: Advanced Tax - Corporate

Unit 10 Liquidation Problem

[Instructor Name]

[Date]

The companies, the founder and every figure are composite; the statutes cited are real.

What this part is doingNaming the two owners and the split result in the lead shows the problem's central point before its schedule.

Facts

Keystone Supply Co. adopts a plan of complete liquidation in March. Plainfield Industries, Inc. owns 85 percent of its single class of stock, with a basis of $520,000; the founder, Walt Kaminski, owns 15 percent, with a basis of $40,000. Keystone's assets at fair value:

1. Cash: $168,900.

2. Warehouse building: value $700,000, basis $250,000.

3. Land parcel: value $150,000, basis $60,000.

Keystone has no liabilities other than its final tax.

Distribution Schedule

Keystone pays $18,900 of tax on its final return and distributes $1,000,000 of net assets. Plainfield receives $150,000 of cash and the building, $850,000, matching its 85 percent. Walt receives the land, $150,000, matching his 15 percent.

Block 1: Keystone

1. Distribution of the land to Walt: a liquidating corporation recognizes gain as if it sold distributed property at fair value (General Rule, Liquidating Corporation, 2024). Gain: $150,000 minus $60,000 = $90,000.

2. Tax at 21 percent: $18,900, paid on the final return, which is marked final.

3. Distribution of the building to Plainfield: no gain or loss, because property distributed to an 80 percent distributee in a liquidation covered by Section 332 is excluded from recognition (Nonrecognition for Property Distributed to Parent, 2024).

The building's $450,000 of built-in gain escapes tax now only because it stays inside the corporate group, carried into the parent at the subsidiary's own basis, while the land leaves the corporate system entirely and so is taxed on its way out.

What this part is doingThe highlighted sentence explains why the two distributions are treated differently, the point graders check first.

Block 2: Plainfield

1. Gain or loss on its Keystone stock: none. With 80 percent or more of the subsidiary's vote and value, the parent recognizes nothing on receiving property in complete liquidation (Complete Liquidations of Subsidiaries, 2024). Plainfield's $330,000 of unrealized gain on its stock, $850,000 received against $520,000 of basis, simply disappears with the stock.

2. Basis in the building: $250,000, carried over from Keystone (Basis of Property Received in Liquidations, 2024). Basis in the cash: $150,000.

3. Plainfield inherits Keystone's tax attributes, including its E&P, its depreciation methods and any carryovers (Carryovers in Certain Corporate Acquisitions, 2024).

Block 3: Walt

1. Amount realized: the land's fair value, $150,000. Amounts a shareholder receives in a complete liquidation are treated as the price of the shares surrendered (Effects on Recipients, 2024).

2. Less stock basis: $40,000.

3. Long-term capital gain: $110,000.

4. Basis in the land: $150,000, its fair value at distribution.

Totals

Tax now: Keystone $18,900 on the land; Walt's tax on $110,000 of capital gain at his own rate. Tax deferred: the building's $450,000 of built-in gain, now in Plainfield's hands at a $250,000 basis, taxed if Plainfield later sells it.

Reporting

Keystone files Form 966 within 30 days of adopting the plan and reports the distributions to each shareholder on Form 1099-DIV as liquidating distributions.

Variation: A 70 Percent Parent

If Plainfield owned only 70 percent, Section 332 would not apply. Plainfield would be taxed like Walt under Section 331, and Keystone would recognize gain on the building as well, $450,000, adding $94,500 of corporate tax.

What this part is doingEnding on the 80 percent threshold shows why the ownership facts decide the whole result.

References

Basis of Property Received in Liquidations, 26 U.S.C. § 334 (2024).

Carryovers in Certain Corporate Acquisitions, 26 U.S.C. § 381 (2024).

Complete Liquidations of Subsidiaries, 26 U.S.C. § 332 (2024).

Effects on Recipients, 26 U.S.C. § 331 (2024).

General Rule, Liquidating Corporation, 26 U.S.C. § 336 (2024).

Nonrecognition for Property Distributed to Parent, 26 U.S.C. § 337 (2024).

AC430 Unit 10 instructions, in plain terms

The final AC430 unit asks you to liquidate a corporation and report the consequences for the corporation and each shareholder. Begin with the assets at basis and fair value, any liabilities and the shareholders' ownership and stock basis. Build a distribution schedule showing what each shareholder receives. Then determine whether any shareholder qualifies for Section 332, which requires at least 80 percent of vote and value. For the liquidating corporation, compute gain or loss on each distribution, applying Section 336 to property going to minority shareholders and Section 337 to property going to a qualifying parent, and compute the tax on the final return. For the parent, state its nonrecognition, carryover basis and inherited attributes. For other shareholders, compute gain under Section 331 and basis in what they receive. Summarize tax now and tax deferred, note the reporting forms, and show how a lower ownership percentage would change the result. Cite each section in APA 7.

How the AC 430 Unit 10 example is put together

The sample's facts list Keystone's cash, building and land with their bases and values, and each owner's stock basis. The distribution schedule nets out $18,900 of final-year tax and gives the parent $850,000 and the founder $150,000. Block 1 computes $90,000 of gain on the land under Section 336 and excludes the building under Section 337. The highlighted sentence explains why the building's $450,000 of gain stays deferred inside the group while the land is taxed on leaving it. Block 2 shows no gain to the parent under Section 332, a $250,000 carryover basis in the building and inherited attributes under Section 381. Block 3 computes the founder's $110,000 of gain and his $150,000 basis in the land. Totals, Form 966 reporting and a 70 percent variation adding $94,500 of corporate tax close the problem.

Where the points sit in the AC430 Unit 10 rubric

AC430 liquidation problems are graded on applying the right section to each shareholder and each distribution. Graders first check whether the parent's ownership qualifies for Section 332, since everything else follows from it. Gain at the corporate level must be computed on property distributed to minority shareholders and excluded on property going to the parent. Corporate tax on the final return should be computed and its payment reflected. The parent's carryover basis and inherited attributes must be stated. Minority shareholders' gain must use fair value received less stock basis, and their basis in property received must be fair value. Summarizing what is taxed now and what is deferred shows understanding of why the rules differ. Recognizing the reporting forms adds practical credit. A variation on the ownership percentage, with clean citations, completes what the last Purdue Global unit asks for.

AC430 Unit 10 help from the desk

Many Unit 10 answers treat every shareholder under Section 331, missing the parent's nonrecognition. Others exclude gain on all distributions, including those to the minority owner. The parent is given a fair value basis instead of carryover basis. The corporate tax on the final return is ignored, so the distributions add up to more than the company had. The founder's gain is computed on the land's basis rather than its value. Inherited attributes go unmentioned. The 80 percent test is applied to vote alone. If your problem involves liabilities, loss property or a liquidation into an individual-owned company, our writers can build the schedule and each block from your section's facts.

Get an AC430 Unit 10 example written to your instructions

Share the Unit 10 asset list with values and bases, the ownership split and your rubric. Qualification is confirmed, each recipient gets a consequence block, gain is reported at the corporate and shareholder levels, and the problem arrives in 24-48h. A first custom sample is free, with no real company or founder in it. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

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AC430 Unit 10 questions, answered

Why is the building's gain not taxed at all?

It is deferred rather than excused. Section 337 lets the subsidiary distribute to its 80 percent parent without recognizing gain, and Section 334(b) gives the parent the subsidiary's $250,000 basis. The $450,000 of built-in gain therefore sits in the parent's hands and is taxed when the parent sells the building, not in the liquidation.

What if the parent owned only 70 percent?

Then Section 332 would not apply, the parent would be treated like any other shareholder under Section 331, and the subsidiary would recognize gain on every appreciated asset it distributed under Section 336. The example's first section exists because prompts often set the ownership near the line to see whether the 80 percent test is checked before anything else.

Does the example cover the subsidiary's final return?

It computes the gain and tax that return would carry, $90,000 and $18,900 at the flat 21 percent rate, and notes that the return is marked final. Filing mechanics, such as Form 966 reporting the plan of liquidation, are named in a sentence. A full return package would belong to a different kind of assignment.

Where can I find a free AC430 Unit 10 sample paper?

This page holds a complete AC430 Unit 10 liquidation problem for a composite subsidiary owned 85 percent by its parent, with a distribution schedule, gain at both levels, deferred gain, reporting and APA 7 citations.

Why is the land taxed but the building not in AC430 Unit 10?

The building goes to the 85 percent parent, so Section 337 excludes the gain and the parent carries over the basis. The land goes to the founder, a minority shareholder, so Section 336 taxes the $90,000 gain.