[Code of Federal Regulations]
[Title 26, Volume 4]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.332-7]

[Page 72]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.332-7  Indebtedness of subsidiary to parent.

    If section 332(a) is applicable to the receipt of the subsidiary's 
property in complete liquidation, then no gain or loss shall be 
recognized to the subsidiary upon the transfer of such properties even 
though some of the properties are transferred in satisfaction of the 
subsidiary's indebtedness to its parent. However, any gain or loss 
realized by the parent corporation on such satisfaction of indebtedness, 
shall be recognized to the parent corporation at the time of the 
liquidation. For example, if the parent corporation purchased its 
subsidiary's bonds at a discount and upon liquidation of the subsidiary 
the parent corporation receives payment for the face amount of such 
bonds, gain shall be recognized to the parent corporation. Such gain 
shall be measured by the difference between the cost or other basis of 
the bonds to the parent and the amount received in payment of the bonds.