B assuming that a code sec 338 election is made what

b. Assuming that a Code Sec. 338 election is made, what is the deemed sale price of Target’s
assets?
c. What is the amount of the adjusted grossed-up basis that is allocated to Target’s assets,
assuming that a tax liability of $15,000 resulted from the deemed sale of assets?
d. What amount of goodwill results from the allocation of basis to Target’s assets?
42. Puzzles Corporation is owned 60 percent by Jay and 40 percent by Scott. Jay and Scott are
unrelated individuals. Puzzles’ two principal assets are cash of $140,000 and a building that
Puzzles purchased 10 years ago and that now has an adjusted basis of $80,000 and a fair market
value of $60,000. What amount of loss is recognized by Puzzles Corporation if it makes the
following alternative distributions in complete liquidation?
a. Puzzles distributes the building plus $60,000 in cash to Jay and $80,000 in cash to Scott.
b. Puzzles distributes $120,000 in cash to Jay and the building plus $20,000 in cash to Scott.

c. Puzzles distributes 60 percent of the cash and a 60 percent interest in the building to Jay and
40 percent of the cash and a 40 percent interest in the building to Scott.
d. Same as (c), except that the building had been contributed to Puzzles Corporation by Scott as a
contribution to capital during 2012, when the building’s basis was $90,000 and its fair market
value was $65,000.
e. Same as (c), except that the building had been contributed to Puzzles Corporation by Jay as a
contribution to capital four years ago (during 2009), when the building’s basis was $120,000 and
its fair market value was $110,000.
43. Panashe Corporation purchased 20 percent of Servco Corporation’s stock on each of the
following dates: January 4, 2012; April 3, 2012; July 14, 2012; December 15, 2012; and January
5, 2013. Can Panashe make a Sec. 338 election to have the Servco stock purchases treated as an
acquisition of assets? By what date must the election be made?
a. How would your answers change if the purchase dates were instead January 4, 2011; April 3,
2012; July 14, 2012; December 15, 2012; and January 5, 2013?
b. How would your answers change if the purchase dates were instead January 4, 2012; April 3,
2012; July 14, 2012; January 4, 2013; and April 15, 2013?
44. Doug and Sally (unrelated individuals) own 60 percent and 40 percent respectively of the
outstanding stock of Platt Corporation. Platt’s assets consist of land (Sec. 1231 property) that was
purchased in 2009 for $90,000 and now has current fair market value of $60,000 and other
property that has a basis of $20,000 and a fair market value of $40,000. Pursuant to a plan of
complete liquidation, Platt Corporation distributes the land to Doug and the other property to
Sally on July 23, 2013.