All Theses, Dissertations, and Capstone Projects

Year of Award



Master of Science in Taxation (MST)


College of Business & Professional Studies

Degree Program



Business Administration


corporation, regulations, stock, distributions, property, taxable


A complete liquidation occurs when a corporation ceases to pursue activities*as a going concern and distributes all remaining property to its shareholders. If certain stock ownership requirements are met a domestic parent corporation does not Recognize gain or loss when all of a domestic subsidiary's property is received in complete liquidation. Similarly the subsidiary recognizes no gain or loss on the distribution of property to its parent in complete liquidation.

Tax principles call for the taxation of foreign earnings when repatriated into the U.S. Thus the general rules for nonrecognition of gain or loss must be altered when the liquidating subsidiary is a foreign corporation making a complete liquidation to a U.S. parent in what is called an inbound subsidiary liquidation. A deferral of income is permitted only to the extent allowable in a completely domestic liquidation. To accommodate these principles current law imposes a tax commonly referred to as a "toll charge." The toll charge required is the inclusion by the parent of a deemed dividend equal to the earnings and profits of the foreign subsidiary plus gain or loss from the exchange of capital. The deemed dividend carries with it indirect foreign taxes paid which the parent may use to claim a foreign tax credit. As an alternative the taxpayer may elect to treat the liquidation as the sale of stock and recognize gain.

Planning opportunities abound for structuring inbound subsidiary liquidations. Numerous tools are available enabling the taxpayer either to comply with the nonrecognition provisions or to pivot and recognize gain or loss. In addition the taxpayer should be mindful that the foreign provisions have been promulgated through administrative regulations and are open to challenge in court.

Document Type

Restricted Thesis

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