When a parent sells a portion of its common stock holdings in a subsidiary at a gain, the gain must be reported in income in the year of the disposal.

Question

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When a parent sells a portion of its common stock holdings in a subsidiary at a gain, the gain is recognized and reported in the income statement of the parent company in the year the sale occurs. This is because the transaction represents a realized gain from the parent's perspective.

When a Parent Sells a Portion of Its Common Stock