A finished ACC-669 Topic 7 two-level liquidation computation example, taxing $410,000 of corporate gain at 21 percent and $663,900 of shareholder gain, then running the same assets through sections 332 and 337. Searches like "acc 669 topic 7 assignment example", "acc669 topic 7 sample" and "acc-669 topic 7 example" land here.
What a finished ACC-669 Topic 7 two-level liquidation computation looks like
An illustrative balance sheet opens the computation: $200,000 of cash, investment land worth $500,000 with a $150,000 basis, equipment worth $100,000 with a $40,000 adjusted basis, and securities worth $50,000 with an $80,000 basis, received in a section 351 transfer three years earlier. Section 336 treats the distribution as a sale at fair market value, so the corporation recognizes $410,000 of gain. The $30,000 securities loss is disallowed by section 336(d)(1), since the sole shareholder is related and the securities are disqualified property. Tax at 21 percent is $86,100, leaving $763,900 to distribute. Against her $100,000 stock basis, section 331 gives the shareholder $663,900 of capital gain, and section 334(a) gives her fair market value basis in each asset. A second panel sends the same assets to a parent under sections 332 and 337, where neither level recognizes anything.
How an ACC-669 Topic 7 example is structured
The computation moves from entity to owner, then to the choice that changes both. An asset table opens it, listing value, basis and built-in gain or loss per item and flagging the section 351 origin of the securities. The corporate panel computes gain asset by asset, applies the related-party loss rule and the 21 percent rate, and pays the tax from cash before any distribution. The shareholder panel sets the net amount distributed against her stock basis and calls the gain capital, with no earnings and profits test, since a liquidating distribution is an exchange. A recommendation panel sells the securities to an unrelated buyer first, recognizing the $30,000 loss and cutting corporate tax to $79,800; her gain rises by the same $6,300, so the saving holds at any shareholder rate. The parent panel follows, and a closing reconciliation shows where deferred gain and preserved basis sit in each case.
Every asset valued before distribution
The table gives each asset's value, basis and built-in gain or loss, because section 336 taxes the corporation as though it had sold everything at that value.
A related-party loss disallowed outright
The securities entered in a section 351 transfer within five years and go to a related shareholder, so section 336(d)(1) denies the corporation their $30,000 loss.
Corporate tax paid out of cash first
The $86,100 due at 21 percent leaves the corporation before the shareholder is paid, so her amount realized is $763,900 rather than the full $850,000.
An exchange rather than a dividend
Section 331 treats the liquidating distribution as payment for her stock, so the $663,900 gain is capital and no earnings and profits computation decides its character.
Selling the loss asset before liquidating
The decline came after the contribution, so selling to an unrelated buyer recognizes the $30,000 loss and saves $6,300 of corporate tax over an in-kind distribution.
The parent case runs without tax
Under sections 332 and 337 neither subsidiary nor parent recognizes gain or loss, and section 334(b) carries the $150,000, $40,000 and $80,000 bases across unchanged.
Where marks go in ACC-669 Topic 7
The corporate layer is the part most often missing: papers that tax only the shareholder on $850,000 less her basis have skipped the $410,000 of section 336 gain and the tax it produces. A second error sets her amount realized at the gross asset value, ignoring that the corporation's tax left first. Running the liquidating distribution through section 301 and an earnings and profits test treats an exchange as a dividend, reversing the rule that a complete liquidation is a sale of the stock. Allowing the $30,000 securities loss overlooks section 336(d)(1) and the recent origin of the property. Giving the shareholder a carryover basis in the assets, or the parent a fair market value basis, inverts sections 334(a) and 334(b). Papers that never ask whether the loss asset should be sold first leave a real saving unexamined.
Get an ACC-669 Topic 7 example written to your instructions
Send the ACC-669 Topic 7 instructions, your rubric and the liquidating corporation's balance sheet. The custom example written to them computes gain or loss asset by asset, applies any loss limits, taxes the corporation at 21 percent before the shareholder is paid, and carries basis into each distributed asset, in 24 to 48 hours. The first one is free.
ACC-669 Topic 7 questions, answered
Why does earnings and profits not decide the shareholder's result?
Because section 331 treats amounts received in complete liquidation as full payment in exchange for the stock. The shareholder recovers her basis and reports the rest as gain, usually capital, however large the corporation's earnings and profits are. Those earnings govern ordinary distributions under section 301 and redemptions that fail section 302. In a parent-subsidiary liquidation they carry over to the parent under section 381.
What makes property disqualified under section 336(d)(1)?
Property the liquidating corporation acquired in a section 351 transfer or as a contribution to capital during the five years ending on the distribution date. When such property, or any property distributed other than pro rata, goes to a related person, the corporation recognizes no loss on it. The rule keeps a shareholder from moving a loss asset into a corporation and harvesting the loss on the way out.
Why is the parent case tax-free at both levels?
Because sections 332 and 337 treat the liquidation of an 80 percent subsidiary as a change of form within one economic group. The parent's stock in the subsidiary disappears without gain or loss, the subsidiary recognizes nothing on distributions to the parent, and section 334(b) hands the parent the subsidiary's bases. The built-in gain is deferred rather than forgiven, and is taxed when the parent later disposes of the assets.