Rev. Rul. 66-290

On the distribution of property in complete liquidation of a subsidiary corporation, where the requirements of section 334(b)(2) of the Internal Revenue Code of 1954 are met, the basis of the property received by the parent corporation on the distribution will be the adjusted basis of the subsidiary corporation's stock with respect to which the distribution was made as provided in section 1.334-1(c) of the Income Tax Regulations.

Certain adjustments must be made to the basis of the subsidiary's stock. Section 1.334-1(c)(4)(v)(b)(1) of the regulations provides that the adjusted basis of the subsidiary's stock held by the parent with respect to which the distributions in liquidation are made shall be decreased by the amount of any cash and its equivalent received. Section 1.334-1(c)(4)(viii) of the regulations provides that following the adjustments to the basis of the subsidiary's stock as required by section 1.334-1(c) of the regulations, the amount of the adjusted basis shall then be allocated among the various assets received (except cash and its equivalent) both tangible and intangible (whether or not depreciable or amortizable).

The phrase `cash and its equivalent' used in sections 1.334-1(c)(4)(v)(b)(1) and 1.334-1(c)(4)(viii) of the regulations includes cash, currencey, bank deposits (including time deposits) whether or not interest bearing, share accounts in savings and loan associations, checks (whether or not certified), drafts, money orders, and any other item of similar nature. It does not include accounts receivable (as the term is commonly used), inventories, marketable securities, and other similar current assets.

Treatment of payment on a mortgage note distributed to a shareholder in complete liquidation of a corporation. See Rev. Rul. 66-280, page 304.